WORKSHEET #10: Comparison of Company to Industry on Components of Volatility
For the industry data, draw on the first random sample of 100 industry customers. In that sample, classify each instance of volatility. Break the Positive volatility into Get-In and Increase Use events, based on the sales volume and percentage of the customer's purchases in the role before and after the volatility event. Do the same thing with the instances of Negative volatility. If the customer changed suppliers entirely, you have a Get-In and Get-Out event. If the customer changed only the proportion he purchased from a supplier, you have an Increase Use and Decrease Use event.
For the company data, use the sample of an earlier period's customer relationships undertaken for Step 9 and follow the same steps as for the industry sample.
For both the company and the industry samples, total the volatile sales volume in each year and divide that volatile volume by the total sales in the sample in each year. Convert that fraction into a percentage of annual sales in the year and then average those percentages over the entire period of the sample. For example, if your period lasts three years, you will have three years of data for both the company and the industry. Calculate the percentage volatile volume in each year and divide the sum of those three percentages by three in order to get the average volatility, on an annual basis, over the full three year period.