ABC Analysis in Sales: How to Identify Key Customers and Work with Them Further

What is the Pareto Principle

ABC analysis is based on the Pareto Principle, named after the Italian economist who formulated it. The rule states that 80% of outcomes come from 20% of causes. In a sales context, this means that if 80% of your revenue comes from just 20% of your clients, those clients deserve extra attention and care.

What is the ABC Method

The ABC method goes several steps further than the Pareto Principle. It divides customers into three categories (A, B, and C) based on how much revenue they generate for your business.

Group A includes the top 10% of customers who generate 75% of your revenue. These are your most valuable clients and deserve consistent attention and care.

Group B consists of 20% of customers who bring in 15% of your revenue. With targeted focus, these customers can be moved up into Group A.

Group C represents 70% of your customers, but they generate only 10% of your revenue. These are low-value purchases that contribute some income but are not worth significant time investment. With these customers, you want to minimize time spent.

How to Perform an ABC Analysis Using CRM

The easiest way to perform an ABC analysis is with analytical tools—such as those in your ERP or CRM system. These tools store all your sales data, which forms the basis for calculating an ABC analysis. Here's how it works using Raynet CRM as an example.

In Raynet, you’ll find an analytics section where you can view your sales results from various perspectives. You can analyze, for instance, salesperson performance, profit trends, or specifically the ABC analysis.

Once you select ABC analysis, the system processes it automatically and displays the results instantly. You can view them as a graph or table. So the only thing you need to do is consistently record your clients and deals in the CRM.

Each column in the graph represents a single client. The columns are color-coded based on the A, B, and C categories. Green clients contribute the most to revenue, while orange ones contribute the least.

When you hover your cursor over a column, detailed information about the client appears, such as:

• total sales,
• percentage share of revenue,
• or exact profit.

ABC analysis in Raynet also includes advanced filters that allow you to customize the results to fit your specific needs. For example, you can:

• set the time period you want to analyze,
• adjust the profit shares that determine client categories,
• or select only a certain group of clients to include in the analysis.
  
  

If you don’t have a CRM or other analytics tool, you can also perform ABC analysis in an Excel spreadsheet. However, you’ll need to manually calculate revenue percentages and determine each customer's group one by one.

If you want to work with sales data smartly and efficiently, try using a CRM in a trial mode. You'll see for yourself whether automated data evaluation can save time for you and your sales team. Plus, you’ll benefit from other useful features such as a clear client database, a sales funnel for tracking deal stages, or a mobile app for work on the go.

How to Work with ABC Analysis Results

Once you have your ABC analysis results in front of you, there are several ways to put them to use.

First, evaluate how much time you're investing in each customer group. For example, if you find that your salespeople spend the same amount of time on C-category customers as on A-category ones, that's a red flag. Reduce the time spent on Group C customers and focus more on Groups A and B. Try to automate as many processes as possible for Group C deals.

Take a closer look at your Group B customers as well. You’ll likely find that at least some of them have the potential to move into Group A. You can encourage this by expanding the solution you offer or simply by giving them more attention. Often, potential A-level clients are stuck in Group B just because they haven’t received enough focus.

Finally, reflect on Group A separately. Many companies tend to become overly fixated on their top clients. Yes, these customers deserve more attention than those in Group C, but if they’re already spending heavily with you, there’s no need to overwhelm them. Instead, consider redirecting some of that effort toward your Group B clients to help turn them into A-level customers.