Inequality in Products, Orders, Customers, Salesmen, and Sales Territories

IT HAS long been recognized by businessmen and students of marketing that a small percentage of a firm's products, customers, salesmen, and so on, account for a large percentage of its sales and profits. Yet the literature is characterized by a noticeable lack of empirical proof of or efforts to quantify this belief. The existence or size of this phenomenon ought to be of considerable interest to the firm. For example, suppose that the top one-third of the customers of a company account for 70 per cent of its sales and 75 per cent of its profits. This could mean, among other things, that the companywas carrying some unprofitable accounts, for marketing costs frequently follow the number of customers rather than the dollar sales.' It might also mean that too much selling and promotional effort is being devoted to the group of customers that accounts for only 30 per cent of the company's sales and 25 per cent of its profits. If this were true, the company could handle its unprofitable customers in two ways: by eliminating them or by attempting to make them more profitable through a redirection or reduction of marketing effort. This article presents the results of a recent study of inequality (or concentration) in marketing. Specifically, the research undertook to measure quantitatively the percentage of sales and profits yielded by the top one-third products, orders, customers, salesmen, and sales territories in a group of well-managed companies.