ABC analysis of alcoholic beverages. Practical application of ABC analysis

ABC-Analysis is a way of classifying (ranking) company resources according to a specific parameter, most often significance. Read how to do an abs analysis, where it is used and what are its advantages.

ABC analysis is based on the 80/20 rule of thumb or the Pareto principle. In general, the rule says that only a small part of the efforts undertaken brings most of the effect - 80% of the result is achieved only due to 20% of the actions. For us, this means that only 20% of customers generate 80% of the revenue, and 20% of the products generate 80% of the revenue.

Goods or services should be divided into categories - A, B and C. It is customary to include assets in group A that provide just 80 percent of the result. For example, if it is necessary to get rid of low-liquid stocks, then goods with regularly high demand will be assigned to group A. Below we will consider all categories in more detail.

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How will help : The regulation allows you to reduce warehouse balances of goods, increase inventory turnover and, as a result, reduce storage costs. Planning is carried out based on ABC analysis.

How will help : Useful for ABC analysis of buyers, efficiency analysis the existing system discounts and bonuses and other terms of sale.

Category A

The most valuable customers or products in your portfolio fall into Category A. Products in this category generate the lion's share of revenue without absorbing an equally large (proportionately) share of the company's resources. This category is likely to consist of a very small number of customers or money-makers.

What formed this category is a topic for close control, manual control and individual approach when it comes to clients. Category A also implies that the loss of a customer or problems with a product in this category is having a noticeable negative impact on the business as a whole.

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Category B

Products or customers ranked in ascending or descending order, which are in the middle of the list, most likely fall into category B. Many people mistakenly believe that we are talking about a sub-segment of products, customers, resources, which contributes to the general "basket", but not enough great in terms of its role in the overall result. This approach is not correct. Category B should primarily include the fact that for certain conditions, efforts and costs, can go to category A. It is generally believed that category B is formed by positions that give the next 15% contribution after category A to the overall result.

Category C

Abs method for inventory analysis

ABC analysis is an excellent inventory control tool. It is convenient to use it to determine which of the storage units have the greatest impact on storage costs. It also provides the foundation for shaping your inventory management strategy.

In fact, each item in the warehouse (or storage unit for raw materials and supplies) generates costs - each storage location costs money: rent per pallet space, costs for utilities, salaries of warehouse personnel, depreciation of warehouse equipment, etc. Therefore, it is important to keep this source of costs under control.

The use of ABC analysis in inventory management is based on the same principles as segmentation of customers or goods. We rank the stocked goods or product groups according to the parameters of interest and allocate them into groups in accordance with the contribution to the overall result for the selected parameter. The parameter for such an analysis is determined by the goals:

• if the task is to reduce the use of warehouse space, then it is necessary to rank product categories by the number of occupied pallet spaces;
• if there is a need to assess the turnover of goods, then shipments to customers should be taken as a parameter;
• information on the most rapidly used stocks of raw materials can be very useful when the topic of “volume discounts” begins to appear in the procurement issue and then we analyze the turnover of raw materials stocks with the parameter “shipment (release, write-off) to production”.

In abc analysis, there is no standard threshold for determining which foods fall into which category. The threshold values \u200b\u200bof the categories, as well as the parameters, must be determined specifically for the analytical task. Even the number of categories can be more than three. However, categories are created using the same principles as for customer / product analysis.

1. Category A is the most valuable product category.
2. Category B is slightly larger and contains products that are of lower value.
3. Category C is the largest, with the smallest contribution to the total value of the analyzed parameter.

Here is an example of some of the thresholds for Category A:

• 20% of products, accounting for 70-80% of the annual shipment to customers;
• 20% of the nomenclature of raw materials and materials, which make up 70-80% of the annual shipment to production;
• 20% of suppliers of raw materials and supplies, which account for 70-80% of the annual volume of purchases.

The traditional proportions for categories - 80/15/5 - can also be used to estimate warehouse stock, but this is not an axiom, as mentioned above.

Dmitry Fourier

Consultant at Neskuchnye Finances company.

According to the Pareto principle, 80% of business profits come from 20% of goods. If you have an online store, you earn 80% of the profit for 20% of the assortment. Let's talk about a method that will help you quickly and accurately identify the same 20%.

The essence of ABC analysis

Take a stationery store. To keep things simple, we will limit the assortment to 10 items.

We get just such a table.

Stationery store assortment for ABC analysis

1. We sort the goods and the profit they bring to us in descending order. You don't need to do it manually - a smart electronic sign will handle it.
2. We calculate the share of each product in the total profit of the business - this is column 3 "Share in the total profit" in the table below.
3. And now the most interesting thing: from product to product, we consider their total share in profit as a cumulative total. The share of markers that took the first place in terms of income is 33.78%. In second place are fountain pens with 28.41% profit. Together, these two products generate 66.29% of the profit for the business. Etc. Ask - why, after all, it is already known that in the end it will turn out to be 100%? And the fact of the matter is that we are interested in intermediate values. After all, we want to know which products form 80% of the profit and what is the role of the rest. The answer is in the table that we got. We see the share of individual products in the third column. But by itself, she still does not say anything. We sort products into groups according to their total profit share. The smart sign calculates this cumulative share in the 4th column "Total share".
4. And last but not least, we sort the products into groups. Anything that is less than or equal to 80% in total is group A. These are the main “breadwinners” of the business. As soon as we have reached the threshold of 80%, the first product, the total share of profit with the participation of which exceeds 80%, belongs to group B. In our example, these are squared notebooks. They increase the total share of the company's total profit from 75.76% to 84.28%. When the next product increases the total profit share to 95% or more percent, this is already the first product from group C. In our example, these are sketchbooks - after them, the total profit share increases to 96.59%. All that remains is also Group C.

This is the result of the ABC analysis. The goods were divided into three groups: leaders - A, middle peasants - B, outsiders - C

As you can see, the store makes 75.76% of its profits on markers, fountain pens and ruled notebooks. Squared notebooks, shared notebooks and notebooks generate 17.99% of business profits. The remaining four positions are 6.25%.

AT classic version ABC analysis the ratio between groups A, B and C is 80/15/5. 20% of the profits that the business, according to, receives from 80% of the goods, in the ABC analysis are additionally detailed - 15/5.

We got a different ratio - 75.76 / 17.99 / 6.25. Nothing wrong. The realities of business do not always fit into the classics. The main thing that total amount was 100%. This is a self-test.

A + B + C \u003d 100%.

In the classic version: A \u003d 80%, B \u003d 15%, C \u003d 5%. A / B / C \u003d 80/15/5.

In our example: A \u003d 75.76%, B \u003d 17.99%, C \u003d 6.25%.

75.76% + 17.99% + 6.25% \u003d 100%. So everything is correct.

The result of the ABC analysis

After the ABC analysis of the assortment by revenue or profit, we will see which products should be emphasized. We pay maximum attention to products that sell well and bring the main money to the business. What to do with the rest, especially outsiders bringing in the least revenue / profit, is a reason to think hard.

We have sorted products into three groups:

1. Group A. Leaders - 80% of sales, 20% of resources.
2. Group B. Solid average peasants - 15% of sales, 20–35% of resources.
3. Group C. Outsiders - 5% of sales, 50-60% of resources.

Information about which group the product belongs to is the basis for making decisions.

Products from group A must always be in stock. The shortage of goods of group A is a drawdown in revenue. As a result of the ABC analysis, we received a ready-made list of such goods. This list can be compared at any time with the current situation. And if necessary, buy the missing goods on time.

But to make large stocks of goods of group C - only to freeze profits in them. You can painlessly refuse goods from group C or deliver them on order. It is up to the owner to decide whether he needs a product from group C.

When a business owner wants to know exactly how much of each product from group A should be in stock, ABC analysis is no longer an assistant. There is a separate tool for this called XYZ analysis. But this is a topic for a separate article. In any case, you need to start with the ABC analysis.

It is useful to conduct an ABC analysis of the assortment separately for two indicators - revenue and profit - and compare the results. A common case is that goods from group A in terms of revenue turn out to be in group B or even C by profit. But goods from group A in terms of revenue in any case provide an inflow of money to the company and are therefore important. When the owner has identified such a product, there is reason to think. Perhaps there are ways to make it more profitable. And if you abandon the goods of group C in terms of profit, then those of them that are in group A in terms of revenue are the last.

If you do not perform ABC analysis on both indicators, there is a danger of focusing on the wrong one. Or refuse a product that would be worth keeping.

Other uses for ABC analysis

ABC analysis is applicable not only to assortment. We recently did it for transport company... The owner was developing a loyalty program and wanted to know who to include in it. This required information about how much percent of the revenue each client brings him and how clients are distributed between groups A, B and C.

In this case, the places of goods in the table were taken by customers and the revenue that each of them brings to the business. Such a table will look, for example, like this (all names and indicators are fictitious, possible coincidences with real ones are random).

Company name	Revenue, rubles
LLC "Ural Prostory"	300 000
LLC "South Ural Logistics"	500 000
CJSC "Expert Solutions"	100 000
SP. Ivanov I. I.	50 000
IP Petrov P.P.	70 000
SP Sidorov S.S.	30 000
JSC "Fresh products"	200 000
Total	1 250 000

After the ABC analysis, the table will look like this:

The result of the ABC analysis of the customer base by revenue. Group A brings exactly 80% of revenue, B - 13.6%, C - 6.4%

Now the owner knows on which of the clients he makes the most money, which of them is the middle peasant in terms of the proceeds that he brings to the business, and who is the outsider.

The business owner will offer the loyalty program to his clients from group A, in the retention of which he is most interested. And clients from group B with the help of the loyalty program will be stimulated to make more orders and move to group A. He continues to work with clients from group C. But there is no point in offering them participation in the loyalty program.

ABC analysis rules

1. It is necessary to conduct an ABC analysis for one indicator that can be measured in money. It can be revenue, profit, purchase amount, receivables (everything owed to the business) or creditor (everything owed by the business). All objects of ABC analysis should be linked to numbers: how much revenue or profit each product or client brings, how much the business earns from each supplier or how much we buy from each supplier, how many receivables hang on each debtor, how much the business owes each creditor.
2. The objects of ABC analysis can be individual goods or groups of goods, customer base, supplier base, debtor base, creditors base.
3. ABC analysis is carried out within one direction. When a business sells cars, parts and repairs cars at the same time, these are three separate areas. It makes no sense to put cars and spare parts in one plate. These are goods of different price categories and frequency of consumption: we change cars every few years, and we buy spare parts for cars much more often. The objects of ABC analysis should have comparable parameters.
4. Usually the ABC analysis is done to adjust the business. In such cases, it is held once a year, and the data is updated quarterly. But if the goal is to increase average check, you can apply the ABC analysis once a month. This approach will allow you to see how management decisions are reflected in the distribution of profits between groups and categories.

Conclusion

ABC analysis is a tool with which you can sort products, customers, debtors and creditors into leaders, middle peasants and outsiders. Find out on whom and what you earn the most, what and whom you can easily refuse, who owes you the most, and to whom you.

How to optimize sales without complex analytical research? First of all, figure out what you are selling. How much are your products a) profitable b) consistently in demand? Are you wasting your budget on unprofitable goods?

Special methods - ABC analysis and XYZ analysis - will help you to get answers and make an informed decision.

In this article, we will show how to apply them and consider the case of an online store of household appliances and electronics, which, thanks to ABC and XYZ sales analysis, increased its profits by 6 times.

The essence of the methods

Let's clarify right away: these methods are used not only for the analysis of the assortment, but also for customers, suppliers and debtors. But since in the article we are considering product categories and sales, we will immediately talk about products.

In short, using ABC and XYZ analysis, you can figure out how important a particular product is in a product line. Typically, this "importance" is measured in two dimensions - sales and / or profits.

In general, it all depends on the goals. If you are looking to narrow your range, look at sales volumes and profitability. Investigate profitability - ROI and turnover rate. Reduce inventory maintenance costs - turnover ratio and occupied warehouse space.

However, it is not enough to know that the product simply brings in a large share of the revenue over a certain period. What if the statistics were influenced by seasonality or other trends? Therefore, it is also important to find out how stable the demand is in the future.

So, you're ranking products by total sales contribution (ABC) and how easy it is to sell (XYZ). First, a little theory about each method.

ABC analysis

You sort and group products based on their contribution to sales.

Task # 1 is to determine which products to focus marketing efforts on (for example, to conduct promotions).

It turns out 3 groups:

• A - the most valuable (20% of the assortment \u003d 80% of sales);
• B - intermediate (30% of the range \u003d 15% of sales).
• C - less valuable (50% of the range \u003d 5% of sales).

To get adequate results:

• Take goods of the same price segment;
• Evaluate according to the most objective values \u200b\u200b(it is better to take statistics for large periods - month, quarter, year).

Note... New products sometimes fall into the group of “candidates for departure”. Obviously, they have not yet had time to recommend themselves and have not accumulated enough statistics to get reliable results and reliable recommendations. Therefore, it is better to exclude “newbies” from the analysis or analyze separately.

The ABC analysis algorithm is as follows (for clarity, the sequence of working with data is also shown in the screenshot):

1) Determine what you are analyzing (product assortment categories) and by what indicator to group it (sales volume);

3) Find the amount of sales for the entire range;

4) Determine what percentage of sales each category brings;

5) Calculate the shares on a cumulative basis;

6) Identify groups A, B and C.

Group A goes from the first line in the list to a value with a share of about 80%. Next comes group B, up to the value where the share approaches 95%. Everything below is group C.

So, now you know which positions are advisable to develop further and which ones are better to stop. However, this is not the final conclusion: it is necessary to determine how stable the demand for them is.

XYZ analysis

You sort and group products by the nature of demand: how stable it is and how accurately it can be predicted. The coefficient of variation of sales helps to determine this, which is calculated using the following formula:

The resulting value shows the percentage deviation of sales from the average. The larger it is, the less the stability of sales of a particular product. Its value is influenced by trends and seasonality, which means that the probability of errors in forecasts increases (lack of the XYZ method).

The method gives an idea of \u200b\u200bhow stable the purchase of a particular category of goods is. It turns out 3 options (in brackets - coefficient of variation):

• X - steady demand + high forecast accuracy, so their sales volume is easy to predict (0-10%);
• Y - volatile demand (in particular, due to seasonality and stocks), but the forecast is possible. For more reliable results, additional analysis can be performed (10-25%);
• Z - random demand, forecast is impossible, since there are no patterns in consumption (from 25%).

To perform XYZ analysis, follow these steps:

1) Calculate the coefficient of variation for each product category;

2) Sort the assortment by this coefficient;

3) Similar to ABC, group the categories into groups X, Y and Z.

ABC + XYZ (cross analysis)

Now you can combine both methods, that is, cross-analyze. There are 2 ways - serial and parallel.

If you need to develop a promotion strategy certain goods, the sequential method will do.

You determine the importance of each criterion and build optimal structure analysis and sequence of steps. First, you apply one type (ABC or XYZ) and one (most important) criterion, then you analyze the resulting groups using a different type and criterion (less important), etc.

Suppose, in order to optimize the space in the warehouse, it is worth first of all to conduct XYZ on the stability of sales, then - ABC on the volume of sales, and finally - ABC on the turnover.

Here's a visualization of another option:

Plus - it is convenient to work with a large amount of data (assortment of a store or a large product group).

If your task is to develop recommendations for working with products of each category, it is better to use the parallel method. This is building a matrix for a given number of criteria (for ABC, you can use several criteria), after which you analyze the categories from all cells.

This is what the matrix looks like:

Here is an option with several criteria:

Matrix building takes attention and focus. Therefore, the method is suitable if the range is not very wide.

Sometimes some cells are left blank. Possible reasons: there are no goods with stable demand, or according to the established coefficients, no category of goods falls into a certain group.

Case

it real story one of the service clients management accounting in small business "Finolog". Business sphere - online store of household appliances and electronics.

Background: after expanding the range, profits stopped growing after a while.

The goal is to find out why and what is preventing a business from thriving.

Initial data - sales for six months for each commodity item:

Based on these data, the consultant calculated the share in the business turnover.

It turned out that the "lion's share" of sales (74.1%) are system units, laptops and monitors. By the way, these positions were in demand even before the expansion of the product line.

Group B includes small household appliances: microwave ovens, irons, electric kettles and vacuum cleaners. It provides 93.4% of the revenue.

TVs and washing machines account for about 5% of the store's turnover, therefore they belong to group C.

To understand whether it is really worth giving up TVs and washing machines, we conducted an XYZ analysis.

• X - system units, monitors and kettles;
• Y - laptops, irons, vacuum cleaners, washing machines;
• Z - TVs and microwaves.

In business, for monitoring various areas, it is used abc andxyz analysis... The ABC method is used more often, as it allows you to break the list into small groups in order to determine the management strategy for each. The increase in the efficiency and effectiveness of the company is mainly due to the identification of key positions that give the greatest result. This method has become widespread due to its versatility and effectiveness.

Objectives and areas of application of ABC analysis in management

The key business goal is to increase profits. ABC analysis it is used when it is necessary to minimize costs and ensure profit when working with a large name of positions that can be

• Assortment of goods;
• Suppliers;
• Distributors;
• Clients.

Thanks to this technique, the units are allocated, the return on which is maximum and with the least return.

If we are talking about a product range, then a review of profits is carried out in order to determine the best selling products. This is done to focus on profitable positions and exclude products that do not bring the expected effect.

When analyzing suppliers, it is necessary to assess the volume of supplies and identify the main counterparties for carrying out measures to increase their loyalty, and form special offers for them.

By ranking distributors by the amount of debt, you highlight less responsible partners and work to reduce the level of debt.

Clients should be divided according to the volume of orders to form a list of the main ones. Key customers show maximum brand loyalty and are ready to recommend it to their friends. This is why knowledge key clientsmeeting with them, receiving from them feedback, the formation of special programs is the key to the success of any business.

The main goal aBC analysis of the customer base, product range and the other position is to classify them according to their importance for developing a strategy for working with each of the categories.

Thus, it allows you to highlight the positions with the highest weight, to assess the associations, and not complete list, develop strategies for them.

By the way, another very useful marketing method is. It allows you to correctly formulate goals and monitor their implementation.

How to do an abc analysis?

This technique is based on the Pareto principle, which states that 80% of the result is given only by 20% of objects, while the remaining 80% give only 20% of the result. To identify titles that generate 80% of the result and created aBC analysis.

The name contains an abbreviation for groups.

A - the most valuable units, from which the main return comes - 80%. Considering the assortment, this will include sales leaders. Key customers, suppliers and distributors will also find themselves here.

B - positions of medium importance. Products that are sold, but are not market leaders, customers who periodically place orders, but for a small amount, etc. This combination gives up to 15% of the result.

C - the least important items that generate only 5% of the result. In relation to such goods, it is worth thinking about the need for their production if we are talking about sales. They are less in demand and only take away expensive resources.

Highlighted if necessary large quantity groups. In practice, the allocation of a larger number occurs when grouping is not carried out by one parameter, but by several, for example, profit and sales. Then a larger number of categories AA, AB, BA, etc. are formed.

If you have a list, then about 20% of this list will fall into category A, no more than 30% in B, the rest - 50% will most likely be attributed to C.

Below is an algorithm for applying the technique

1. Determination of the purpose of the process, the expected result, the need for its implementation;
2. The choice of the object of research, which can be products, suppliers, customers or distributors;
3. The choice of the parameter according to which the ranking will take place, as mentioned above, there may be several of them, but you should not take more than three, so as not to complicate the process;
4. Rank the list according to the value of the selected parameter from the largest to the smallest;
5. Summarize the total value of the parameter in the list;
6. Calculate the share of each item in the total;
7. Determine the proportion for each unit on an accrual basis, where the last in the list will have 100%;
8. The value of the share on a cumulative total, as close as possible to 80%, is the lower limit of group A, to 95% - group B, everything that is located below will be included in group C;
9. Count the number of items in the list;
10. Determine the total number of units in each union;
11. Calculate their share in each category in total volume;
12. Compare the obtained values \u200b\u200bwith the normative ones.

The result of the conduct should be not only formed lists, but also an action plan for working with each organization.

Abc analysis can be carried out both manually and with the help of tools excel.

Advantages and disadvantages of ABC analysis

The technology in question has become widespread due to its advantages.

• Easy to use. It does not require a large amount of data and easily enables the necessary calculations.
• Fast application. You don't need to collect information for a long time.
• The results obtained are relevant for a long period of time and can serve as the basis for the formation of a development strategy.
• Reducing costs and improving the efficiency of using available resources while abandoning class C.
• Applicable in different areas and for a variety of metrics, ranging from assortment review to customer engagement.

Despite the objective advantages, the presented technology has several disadvantages that you should remember when conducting it.

• It is difficult to conduct research on more than 3 indicators due to the need to form more than 100 associations.
• Positions can be grouped only by measurable indicators, qualitative indicators are not taken into account in the specified method.
• Does not allow to highlight unprofitable or problematic names.
• Does not take into account the influence of factors of seasonality, unevenness, purchasing power, etc.

Abc analysis example

Let's spend abc assortment analysisstore of upholstered furniture. This store offers a limited range of products: sofas, armchairs, pillows, blankets and bedspreads, office chairs, chairs for the home.

You can order a detailed business plan for such a turnkey store from us, or buy it in full ready business plan with all calculations.

Over the past month, the store's revenue fell, the manager decided that it was in the range and decided to follow the described method.

As a parameter for analysis, we select the sales volume based on the results of the previous month. Opposite each item, we indicate the number of pieces sold, rank from the maximum value to the minimum, determine the share of sales of each product in the total volume and the share on an accrual basis.

1. Sofas - 30 pcs. (share separately 40%, cumulative total - 40%)
2. Armchairs - 29 pcs. (separately 40%, accruing total - 80%)
3. Chairs for home - 11 pcs. (share separately 15%, cumulative total - 95%)
4. Pillows - 2 pcs. (share separately 2%, cumulative total - 97%)
5. Blankets and bedspreads - 2 pcs. (share separately 2%, cumulative total - 99%)
6. Office chairs - 1 pc. (share separately 1%, accruing total - 100%)

We find the value of the share as a cumulative total, as close as possible to 80%, this is the boundary of category A. Boundary B is in the third position, since the value of 95% is reached, the remaining positions are included in class C.

A - sofas and armchairs - 80% of the result is given by 20% of the items.

B - chairs for home - 15% of the result gives 30% of the range.

C - pillows, blankets and bedspreads, office chairs - 5% of the result gives 50% of the range.

The results obtained correspond to the normative ones.

Thus, we can conclude that the management needs to focus on the variety and quality of the key position - sofas and armchairs, and give part of the retail space of class C goods for their sale. As for office chairs, there is no need to sell this range in the absence of demand.

Carrying out abc analysisis not difficult, however, it is necessary to take into account some recommendations.

You should choose homogeneous positions for research. If you are considering food products, then divide them into product groups. You shouldn't compare the sales of red caviar and a loaf of bread.

Pay attention to the choice of parameter, in addition to the fact that it should be quantitatively measurable, it should provide an objective assessment. Volume of sales seasonal goods increases in the summer months, try to take into account such nuances.

The frequency of application of the technology under consideration will allow tracking the progress of the application of strategies for various categories.

It makes no sense to monitor the indicators manually, use the Excel program and the calculations will not take more than one minute.

This technique can be useful in many areas. For example, when, you can also use the ABC method.

conclusions

Methodabc analysis allows you to identify products that bring the business maximum results and directly affect profits. Working with homogeneous associations according to a specific strategy increases efficiency. This is reflected in efficiency and financial sustainability companies. This method is widely used not only in the field of trade, but also in the field of production, provision of services, and logistics.

You can order a detailed turnkey business plan from us, or buy a completely ready-made business plan with all the calculations.

ABC XYZ analysis in sales management is a method of classifying objects by value, quantity and frequency of shipments (or orders).

With ABC analysis, we define current value client. To this end, we award our clients the following categories:

• ABC categories: by purchases (sales);
• XYZ categories: by frequency (regularity) of purchases (sales).

ABC analysis is built on the basis of the Paretto principle: a relatively small number of reasons are responsible for the majority of possible results.

There are two types of ABC XYZ analysis - classic and modern.

AT classic form for the client base, the categories of clients by sales volume will be as follows:

• Category A: clients c the largest volumes purchases, 80% of total sales;
• Category B: customers with average purchase volumes; 15% of total sales;
• Category C: customers with small volumes of purchases; 5% of total sales.

AT modern ABC XYZ analysis, the top category of customers is divided into 2 groups for more detailed analysis and category D is added: category A is assigned 50% of the sales volume, category B is assigned 30% of the sales volume:

• Category A - 50% of the sales volume;
• Category B - 30% of sales;
• Category C - 15% of sales;
• Category D - 5% of sales.

If a client has left you for a competitor, resume working with him as a new client in half a year or a year.

The ideal ratio in terms of shares in ABC customer categories in terms of sales and the number of customers from the total number in the database will be as follows:

It is a balanced and manageable sales state. Any deviation will show you in which direction you need to work in order to develop your customer base.

If the share of clients is displaced from the standard, this indicates violations in the work with the client base. Your managers may not work with the client and not develop the potential of the territory.

If the share of a category is higher than the standard, it means that customers in this category can move to a higher category. If the share of a category is below the standard, it means that the company is not picking up customers of this particular category. That is, the territory has not been captured.

If sales best clients category A more than 10 times the sales of the best customers in category B, then these are VIP customers. And for them you need to allocate a separate manager.

XYZ analysis determines the regularity and predictability of purchases (sales) and contains the following categories:

• Category X: clients with stable orders, for these clients accurate forecasting of sales is possible;
• Category Y: customers with irregular orders;
• Category Z: customers with single orders.

ABC XYZ analysis solves the following tasks:

• Will clearly show your flaws with clients;
• Determine the strategy for the development of the client base in order to transfer the client from Categories to Category;
• Will determine marketing strategy in attracting new clients.

ABC XYZ ANALYSIS: ALGORITHM - 5 STEPS OF DEVELOPMENT

Carry out ABC XYZ analysis according to the clear steps presented below.

Step 1:Define the purpose of ABC XYZ analysis

Many people perceive ABC XYZ analysis as a tool, but it is not a thing in itself. You use ABC XYZ analysis to increase your sales. Here is a list of goals that our clients usually set:

• Study key customers to determine qualification parameters;
• Increase the average cost of the contract;
• Improve the work with suppliers;
• Optimize the product matrix.

Step 2:Select objects of ABC XYZ analysis

Determine which database objects you are analyzing:

• number of points of sale;
• number of clients in the database;
• number of orders for the period.

Step 3:Define ABC XYZ Analysis Criteria

Select the parameters by which you will analyze the database:

For ABC analysis:

• sales volume for the year;
• profit from sales for the year;
• the number of orders for the period.

For XYZ analysis:

• regularity of orders

Step 4:Calculate the cumulative total value of the ABC XYZ analysis criterion

Step 5:Assign a category to the objects of analysis in the order of their contribution to the result

ABC XYZ CLIENT ANALYSIS: HOW TO APPLY

The purpose of ABC XYZ analysis is to divide the customer base into segments and explore patterns purchases from specific customer segments.

When developing sales, it is very important to develop the right strategy for capturing the market: in which direction we run and what customers we attract.

ABC XYZ analysis allows us to describe key customers (category A) and understand which market niches and segments we should process and what USP to demonstrate to them in order for these companies to start buying our product.

Based on ABC analysis, we develop Client questionnaire and write the rules qualifications client. The better we qualify and determine the potential of the client and the likelihood of the deal, the faster we will close the deal and fulfill the sales plans.

ABC XYZ analysis is a versatile client study tool. With the help of ABC analysis, we draw conclusions:

1. about the state of our client base:*** Does it deviate from the standard distribution of shares between categories? If there is, we analyze where and in what we are underperforming with clients of this or that segment. ///
2. about strategically important clients:*** We highlight clients who provide 80% our income. We analyze our methods of working with them. Determining how to apply these methods to customers of category B in order to increase the average check for them and transfer them to category A. ///
3. about our sales strategy:*** Where is our customer strategy weak and how it needs to be improved. ///
4. about incorrect actions in relation to clients:*** ABC XYZ analysis clearly shows the share of which customers in sales fell. Based on statistics and analysis for each client, we identify ineffective working methods. We avoid them in the future.

Sales department optimization should always start with an ABC XYZ analysis.

ABC XYZ ASSORTMENT ANALYSIS

In companies that sell goods in an assortment of more than 30 positions, “hanging” positions and illiquid assets regularly appear, from a price list of 1000 positions no more than 100 positions can be sold sanely, and new receipts undeservedly drop out of sales.

Most managers may not recognize problems with the assortment until they run out of money for circulation, the stock in the warehouse will become more sales, and suppliers will start shaking money for the goods that lie in the warehouse with a dead weight.

In trading companies with a wide range of ABC XYZ products, analysis solves the following problems:

1. Assortment cleaning from trash, i.e. identifies from the assortment the entire group or category of goods that are selling poorly. ///
2. Brings order in a specific group of goods: for cases when the range of the group contains items that are illiquid and ineffective, but they spend working capital and take up storage space.

If you sell a range of services, ABC XYZ analysis allows you to understand what products are purchased from you in large volumesfor which products you get more arrived and what products are purchased more often.

Thus, ABC XYZ analysis helps you form a sales strategy by product and by customer.

ABC XYZ ANALYSIS: SUMMARY MATRIX

In the ABC XYZ matrix of the analysis, the categories of customers are combined, the result is 9 groups clients. The matrix helps to cross-analyze the customer base by criteria volume of sales and regularity of orders:

• Categories AX, AY, BX, CX (retention and development): These are the categories of customers that need to be retained and developed - transferred to a higher level category. There is a constant demand for products in this category, so they need to be kept in stock and improved. ///
• Category АZ (analysis): there are erratic orders from important customers. It is important to analyze what goods or services are being sold unstably and correct the situation or understand how to transfer these customers to the AX and AY categories. ///
• Category CZ (decreased activity): Here are the customers with whom you need to stop working in order not to waste the time of the sellers.

Using the ABC XYZ matrix, analyze all categories of customers and highlight the reasons why they do not buy as much and consistently as you would like, and also index the signs by which you form new the segment of the market that you need to enter in order to expand your customer base and increase sales.

ABC XYZ Matrix: Analysis Steps

1. Customer analysis*** You are researching sales volumes and their regularity. Using the deviation figures, you determine with which category A or B clients you are not finalizing. These categories of ABC XYZ analysis are the most important in terms of transferring them to a higher category: a customer of category A to category A +, customer of category B - to category A. *** To determine the points of development of these customers, it is necessary to analyze the customer's purchase cycle, his supplier selection criteria and client decision-making process. *** To do this, it is necessary to interview the client by phone, for category A. a personal meeting is desirable. *** It is also necessary to understand where in the client value chain your USP does not meet the client's needs ... Then revise your proposal to the client. ///
2. Analysis of the work of sellers*** After analyzing customers, it is necessary to analyze the methods of work of sellers If one seller leads clients of categories A, B and C - this is wrong. *** To work with clients of categories AX / A + X and A / A + Y, a manager with pumped-up negotiation skills - KAM (Key Account Manager) must be allocated ... You probably need to adjust the functionality of managers and the structure of the sales department. ///
3. Analysis of bottlenecks in business processes*** ABC XYZ analysis matrix allows you to identify bottlenecks in your business processes. Working with a customer base can go badly due to overloaded functionality, poor workflow, poor process automation, imperfect processes in production and logistics. When analyzing customer needs (see clause 1), your task is to identify all customer complaints and eliminate them. ///

ABC ANALYSIS: EXAMPLE

For ABC XYZ analysis, it is convenient to use a ready-made template:

For XYZ analysis when examining shipping frequency and assigning X, Y, or Z categories to customers, use the template:

Use ABC XYZ analysis to regularly study your customer base, identify customer qualification criteria, and strengthen sales techniques.