Penetration Analysis

Table 13-1 gives a simplified example of a penetration study for a company that sells to several industries.

Table 13-1 : Penetration Analysis

	Weldon customers	U.S. universe	Penetration ratio	Lifetime value	Target potential	Rank
Metal production	254	2,433	10.44%	$145,067	$15,144.68	3
Light manufacturing	15,442	162,009	9.53%	$5,914	$563.70	4
Heavy manufacturing	44	1,288	3.42%	$988,145	$33,756.51	2
High technology	612	1,453	42.12%	$127,675	$53,776.39	1
Total	29,198	167,183	17.46%

The company has 29,000 customers, roughly divided into four sectors. As you can see, most of the company’s sales come from light manufacturing. The companies with the highest lifetime value are in heavy manufacturing. But the high-technology sector is particularly interesting. The U.S. universe comes from Dun & Bradstreet data. It shows the number of companies in the SIC codes that Weldon sells to. As you can see, Weldon’s penetration in the high-technology sector is very high: 42 percent. This means that Weldon is a household word in this industry. It will be much easier for Weldon to pick up an additional customer in this sector than in any of the other three because it is so well known there. This shows the power of penetration analysis.

Target potential is derived by simply multiplying the penetration ratio by the lifetime value. This is a simple approach, but it has value.

Here is another approach to customer acquisition for a business-to-business situation.