Enhance Profitability

When effort is invested to collect and utilize profitability data the return to the business in terms of improved decisions can be significant. Too often sales metrics are focused on quantities and revenue. While these are critical to any business, effectiveness of decisions can be enhanced by adding views of sales profitability by product, sales rep, region, or channel.

For example, in the accompanying screen shot an executive or sales manager would get one picture of sales performance by looking at Sales by Product by Month. Looking at this same data for Profit by Product over the same time horizon, as the second screen shot shows, reveals several insights that are potentially troubling. One product (LG F9100) is marginally profitable and in some months unprofitable, while another product (such as the LG C1300) earns disproportionally high margins. Another product (Nokia 3120) experiences significant swings in its profitability over time while the revenue over the same period is relatively steady.

A rule of thumb in many product categories across industries is that 80% of the profits are generated by 20% of the products (or services) sold. Wouldn’t you like to know precisely each month and over time, which of your products are in that 20%?