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Analysis 7: Industry Growth by Customer Size

EXHIBITS:

 

HOW TO INTERPRET THE ANALYSIS: In this industry, the market overall grows at 5.5% per year in units. That means that this year's sales, in units, are 5.5% greater than last year's sales. The exhibit further demonstrates that the Very Large customers are growing considerable faster than the other three size segments in the market. The Very Large customers are growing at 6.5% per year. This growth rate far exceeds the 3.5% per annum growth of the Large customers. This growth is considerably larger than the growth rates of the Medium and the Small customer segments as well.

PURPOSE: This analysis indicates the market (i.e. total industry) growth rate by customer size segment. This insight helps the company determine the importance of various size segments to the company's future growth rate. It also prompts a consideration of why some customer groups are growing faster than others. This evaluation may lead to further segmentation in the market.

APPROACH: To complete this analysis, the company should total industry sales by customer size segment for the beginning year of the period studied. This analysis should be done using specific customers for both the beginning and ending years. Customers may change size categories during the period under study. Compute the growth rates, in units if possible, of each customer in the VL, L, M, and S segments.

In order to project the growth rates of each size category, the company must calculate the growth rate for the group of companies who started the period as Very Large, Large, Medium and Small customers, no matter what size category the customers are at the end of the period. The company should then calculate an average growth rate for each size category, as well as for the market as a whole.

The company uses these growth rate estimates to project the growth rates for customers of a given size category when it does not have better information for the customers. More specifically, the company will use these growth rates to project estimates for "Get In" and also "Opportunistic" customers where no better estimates exist.

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For a greater overall perspective on this subject, we recommend the following related items:

Analyses:

Symptoms and Implications: Symptoms developing in the market that would suggest the need for this analysis.

Perspectives: Conclusions we have reached as a result of our long-term study and observations.

  • "Which Customers Matter Most?": Average customer profitability differs dramatically in non-hostile and hostile markets. Does the relative importance of one customer versus another change as well? The answer is less evident than many business leaders believe. (1994)