The ABC Sales: Contribution Analysis

The ABC sales: contribution analysis helps companies to identify the relative value of different market segments and assists in deciding on resource allocation as a result.

  1. List out for each segment served by the business (may be by product for example or territory) current sales in volume or value of turnover.
  2. List out for each segment the current levels of financial contribution ( sales revenue/turnover minus all variable costs)
  3. Graph the data for current sales and for financial contribution on a chart like the below.
  4. In the ideal all segments will appear in the top right quadrant – high sales, at high financial contribution. Reality may be though that segments will appear in the lower left quadrant – low sales, low contribution or it may be high sales low contribution.
  5. Not all segments will be close to the ‘optimum’ diagonal line bottom left to top right and these outliers require attention:
- A question mark should hang over any segment located in the bottom left quadrant – they are draining marketing and sales resources
- High volume sales segments in the top left quadrant should be examined for opportunities to increase contribution, even by a few percent.
- High contribution segments in the bottom right quadrant should similarly be examined for opportunities to increase sales volumes, again even by a few percent.




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