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Quartile analysis and maximising your Revenues and Margins.

Updated: Aug 3, 2021

By Michael O'Donnell

18th January 2021

What are quartiles and how are they useful? I’ll try to keep this as simple an explanation as possible!

How do you spot your champions? In a quote that may yet become his epitaph, the boxing promotor Don King ruthlessly declared, “I came into the ring with the champion,” he said, “and I left with the champion.”

In your business, what are your champion clients and products? How flexible are you to changing your client, product and services mix?

Quartile analysis helps you to quickly simplify your understanding of your customer base into manageable portions so that you maximise your Revenues and Gross Profits. It enables you to take the decisions needed to either support and enhance your best channels and park or discontinue your worst. Thereby, you minimise activities that reduce your time, energy and costs and maximise those activities that do.


Tier segmentations:

Segmenting your customer base, product lines or service packages in an ad hoc way can be risky. The danger is that hubris and arbitrary segmentation cover up the true picture about how profitable these groupings are. Internal, ulterior and vested motives within your organisation can also cause this to happen. As the business owner, you need keep an overview so that you can make corrective decisions, quickly if needed.

Some currently low-tier clients and product lines may be regarded as growth phase, and we allow them too much latitude to run without a periodic – and not just an occasional - review.

Long-term cash-cow clients may have been increasing in scope due to their intangible value to the business, but true efficiencies and bang-per-buck may have been declining. These intangible relationships enable wider networks, open new doors and justify their worth to the business elsewhere. Value-add, up-selling and expansion opportunities all need to be considered.

Ultimately clients’ value to the business ought to be measured, in monetary and time/cost terms. What is the average revenue per client (ARPC) and if your cost-base is detailed enough to be analysed on an activity basis, what is the direct margin per client (DMPC)?

Understanding your ARPC will help you to maximise your revenue as the market allows, minimise the costs for servicing those clients and increase margin %. Market pressures may be preventing you from price increases.

At various stages we can all accept the moniker ‘the busy fool’. Nevertheless, as we try to be everything to everybody, we need to reflect and self-audit our offerings periodically.


What not to do: Arbitrary categorisations

Based strictly on revenue, but with arbitrary groupings, the example company on the left has:

- Five Tier 1 clients at an ARPC of €69.4k per client

- 16 Tier 2 clients at €19.3k per client down to

- 151 Tier 6 clients at €300 per client.

The business' Tier 1, 2 and 3 clients spend well, but a large population of Tiers 4-6 spend very little.

The lower tier clients require proportionally more dedication and customer service.

How does the business establish whether a shift in client focus is necessary?

NOTE: There is always the danger that parking so many lower clientele will result in poor PR and word-of-mouth. Going forward, these clientele can be gently avoided and declined.


Solution: Quartile Analysis:

This distributes the customer base into four quarters, based on the following logic:

A. Revenue Quartiles

The below example categorises the same business' clients into four Quartiles based on Revenue bands, nicknamed Platinum, Gold, Silver and Bronze.

This results in:

- Only one client at €103k revenue

- Two VIP clients at €77k average revenue per client

- Six clients at €37.3k average revenue per client

- 444 clients at €1.9k average revenue per client

The costs of servicing 444 clients bringing in just over 63% of the revenue shouldn’t be overlooked.

Revenues from Bronze is the largest proportion, but when assigned with the associated direct costs of customer service, parts, travel, call outs etc, margins are much tighter.

Unless these costs can be controlled, profitability will be questionable.

A focus on increasing Gold and Silver clientele while declining Bronze quartile clients will improve Margins.

As culling trade with 444 clients is particularly 'courageous' (!) - the business needs to come up with alternative methods of servicing them at minimal cost. This can be done by deciding on the required margin %, then back-engineering the maximum costs allowable.


B. Client Quartiles

Pareto's 80:20 principle suggests that 80% of our revenue will come from 20% of our clients. This second quartile method splits the client base into four even quarters as follows:

In this split, the business' Silver and Bronze categories (half the clientele) only yield 8% of the total revenue with between ARPC of €700 and €200 respectively.

Proportionally, these draw more direct costs to service.

While it's a broad sweep to take, the owner may choose here to discontinue with the lowest 50% of clientele and enhance relations with the best 50%.


Other perspectives: Using quartiles to reduce organisational conflicts:

Quartiles can also be applied to non-financial business information such as marketing mixes and sales pipelines.

Dimensional analysis enables a business to view and counter conflicts and self-interests that naturally exist within organisations.

Again, by simplifying a range of data into four easily understood quarters, it makes it easier to understand and communicate between department heads with different agendas.

Quartile perspectives rubik



Quartile revenue and client analysis simplifies your understanding of your key metrics.

Clients, products, packages etc. are distilled to simplify your decision making.

Like a speedometer on your car telling you how fast you're travelling, Average Revenue Per Client is a useful metric which should be one of your business' metrics. It enables you to adapt your client-base, product and packages as necessary, maximising your Direct Margins.

If your business needs this type of improvement, get in touch and we can model your data quickly.

Kind regards,



Images: copyright InCtrl & Shutterstock

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