As Covid-19 declined, a European multichannel retailer observed a decline in its online revenues, which caused alarm. But then they looked at the data a different way, focusing on transactions by individual customers. When they sliced the data in this manner, they realized that their customer base was actually healthy, but that their channel behavior had shifted: Online purchasing, which had become unnaturally accelerated during the pandemic, was now returning to a more normal pattern of online and offline purchasing.
Do You Really Understand Your Best (and Worst) Customers?
Shift from asking, “What makes us money?” to “Who makes us money?”
December 23, 2022
Sviatlana Barchan/Getty Images
Summary.
Most companies analyze financial performance by looking at geographic segments, product lines, or channels. These perspectives overlook the fact that aggregate revenues are dependent on individual customers, and that’s why analyzing the business by looking at its customers can provide managers with useful insights. This process, called a customer-base audit, can be a tool for businesses as they seek to answer five questions: Who are our best and worst customers? How is customer behavior changing? How does a cohort of customers change over time? How do different cohorts behave differently? And when you put the answers to these questions together, what do they suggest about the health of the business?