Client portfolio analysis cases

client solutions customer
New answer on Apr 10, 2021
2 Answers
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Roberto asked on Apr 10, 2021

When you are working on a case related to client analysis, how do you know if the client portfolio is too concentrated? Are there any metrics to determine this? For example, if the top 10 customers collectively account for more than 50% of turnover... or if there is a customer that accounts for more than 20% of turnover .... etc. How do you analyse this?

What worries me most is how to justify the answer to an interviewer. What to base the reasoning on to say that one criterion or the other is the most appropriate.

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Florian
Expert
replied on Apr 10, 2021
Ex-McKinsey | 5+ years consulting experience | Active interviewer & coach | Healthcare industry | Inhouse Consulting

Hi,

without further context it is impossible to provide a general answer to this. There are too many factors that play a strong role here (e.g. what is the industry, etc.). Generally, I would consider the profitability of each customer and analyze whether a significant share of the customers are not really profitable. Then the profitability needs to be compared with the costs/effort to serve the customers.

General rules could be:

- If the profitability of the less profitable customers is still high/acceptable, you could increase the number of customers // If many customers are not very profitable, you may want to consider increasing the number of customers

- If the marginal effort to serve another customer is high, concentrating the customer portfolio would be preferred // If the marginal effort is low, you may want to consider serve more customers.

Depending on the situation/context, additional factors might be important. Would need more information to address these.

Hope this helps and PM me if you have further questions

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Ian
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Content Creator
replied on Apr 10, 2021
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi Roberto,

Context matters a lot here. This is case-specific.

In general, you can look a standard deviation, averages/means, a stacked bar chart indicating market share etc.

Furthermore, when determining if something is "too much" or "too little" the best trick/technique is benchmarking.

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Florian gave the best answer

Florian

Ex-McKinsey | 5+ years consulting experience | Active interviewer & coach | Healthcare industry | Inhouse Consulting
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