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Customer Portfolio Importance & Components

Edith Forsyth, Beth Hendricks
  • Author
    Edith Forsyth

    Edith Forsyth has taught High School Business for over five years. They have a bachelor’s degree in business administration from University of Evansville, Evansville, Indiana.

  • Instructor
    Beth Hendricks

    Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

In this lesson, learn what a customer portfolio is. See the main components involved in forming a customer portfolio and the importance of a customer portfolio. Updated: 05/21/2022

What is a Customer Portfolio?

The most important stakeholder in a business is the customer, also known as the client. As such, maintaining a portfolio of clients is vital for any business. But what is a client portfolio?

A client portfolio, also known as a customer portfolio, is a document that details the various customer groups that a company does business with. Essentially, it is a tool that helps companies maintain strong relationships with and keep track of their customers. This client portfolio meaning confirms the importance of customer relationships. Businesses must understand and relate to their customers to enhance trust and improve customer experience.

A customer portfolio is a collection of customer groups that encompasses the company's customer base. It helps the business understand the behavior, needs, and demands of its clients, or customers. Accordingly, firms categorize their customers into groups depending on their needs and the nature of their relationship. By classifying their customers in this way, businesses can understand the importance of each client, subject to sales and profit goals. Consequently, customer categorization helps companies create additional value for their most important customers, thus facilitating customer retention.

Engaging with, and maintaining, positive customer relationships contributes to business success. In this context, a client portfolio helps companies in strategic decision making. For example, a business can formulate and execute effective marketing strategies targeting the most valuable clients depending on its customer groups. This approach will ensure that the organization methodically allocates resources towards marketing, customer retention, and client development.

Another importance of a customer portfolio is that it helps businesses determine their priorities. Prioritization is especially important when choosing and developing a customer base. The assessment of customers is conducted with regard to their demographics, behavioral patterns, profitability status, psychographics, and market trends. A client portfolio facilitates this assessment. In other words, a customer portfolio will help the business get a better picture of the characteristics, behaviors, and importance of their customer base.

Characteristically, a portfolio includes the following:

  • The name of the company
  • Associates and points of contact
  • Industry and domain
  • Goods and services associated with the company and its customers
  • Billing information and average revenue
  • Type of relationship with the customer
  • Potential opportunities for cross-sells and upsells
  • Any other pertinent detail related to the client, company, or industry

An example can help illustrate the nature and importance of a customer portfolio. Consider a cleaning business. Its client portfolio may categorize customers into groups such as the following:

  • Hotels
  • Public schools
  • Restaurants
  • Households
  • Large corporations

A real-world example of a customer portfolio can be derived from Coca-Cola. On its website, the company reveals details of its client portfolio by recognizing its partnership with an international chain of restaurants, retailers, and small businesses. The company further discloses that the main buyers for its soft-drink products are discount stores, large grocers, and restaurants. Since Coca-Cola proves that it understands its customer base, it explains why the company dominates the market and achieves unprecedented business success. This client portfolio guides the company in several areas:

  • Generating business solutions
  • Predicting market needs
  • Improving sales
  • Creating support services
  • Making marketing decisions.

Customer Portfolio Components

It is important to note that a client portfolio is not just a list of customer groups and names. There are important components that must be included in the portfolio. There are four core components of a customer portfolio:

What Is a Customer Portfolio?

How well do you know the people in your life? Sure, you probably have acquaintances like colleagues, people you know from the gym, and friends of friends. But the people you really know, you know in-depth: their favorite restaurant, what makes them laugh, how they like to spend their weekend.

Though businesses don't have friends (in the true sense of the word), they do have customers. And knowing and understanding how those customers operate and what makes them tick can either make or break a business relationship. That's where a customer portfolio can come in handy.

A customer portfolio is a segmented list of the various groups that do business with you. Think of it like a financial portfolio. An individual might have a grouping of all their financial assets, broken down into various categories such as stocks, bonds, student loans, mortgage, and car payments. This portfolio helps them to get the big picture about their financial situation. Similarly, a customer portfolio can help a business get the big picture about its customer base.

For example, a dry cleaning business might have a customer portfolio with the following groups:

  • Individuals and walk-in customers
  • Big corporations
  • Public schools
  • Restaurants
  • Hotels

The Coca-Cola brand, for instance, details some of its customer portfolio on its website, referring to its partnerships with ''large international chains of retailers and restaurants and small independent businesses.'' By understanding who its customers are, Coca-Cola is able to do just about everything better: marketing, support services, improving sales, anticipating needs, and creating business solutions.

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Customer Portfolio: Components

So what's in a customer portfolio anyway? Is it just a big list of business categories and names? Hardly. Here are the important components that help you better understand who you work with.

1. Customer Analysis and Behavior

If you're trying to figure out how your customers select products or why their processes are the way they are, you need to do a customer analysis. A customer analysis helps break down who your customers are in terms of demographics, psychographics, and behavioral patterns. Demographics might include the age of a business or the gender or racial makeup of its workforce. Psychographics, on the other hand, take into account opinions, attitudes, and aspirations. Behavioral patterns might include how a customer makes decisions or influences other customers. Combined, this information helps build a profile of your customers.

2. Marketing Audits

A marketing audit is a way to examine a business' products or services and how they relate to the customer. It should include information on how you want to solve a customer's needs and characteristics of the marketplace and how to succeed in it. It may also take a closer look at the competition and how it stacks up as well as a look at your industry in general.

3. Customer Profitability Analysis

Customer profitability analysis is a tool used to determine who are and aren't your profitable customers. All businesses have customers who are less profitable for the bottom line than others. This exercise helps businesses determine the customers they want to attract, retain, and grow. The profitability analysis looks at both the revenue streams from customers and the costs associated with certain customers or groups both day-to-day as well as over the life of the relationship.

4. Customer Retention and Loyalty

We're all familiar with customer loyalty: those feelings and experiences that keep us going back to a brand over and over again. In a customer portfolio, looking at customer loyalty is an examination of the likelihood of a customer to go elsewhere. It may also include churn rate, which is the number of customers who do leave.

Customer Portfolio: Importance

A customer portfolio is a tool in the toolbox for business owners and managers. They have numerous benefits of strategic importance for a business.

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Video Transcript

What Is a Customer Portfolio?

How well do you know the people in your life? Sure, you probably have acquaintances like colleagues, people you know from the gym, and friends of friends. But the people you really know, you know in-depth: their favorite restaurant, what makes them laugh, how they like to spend their weekend.

Though businesses don't have friends (in the true sense of the word), they do have customers. And knowing and understanding how those customers operate and what makes them tick can either make or break a business relationship. That's where a customer portfolio can come in handy.

A customer portfolio is a segmented list of the various groups that do business with you. Think of it like a financial portfolio. An individual might have a grouping of all their financial assets, broken down into various categories such as stocks, bonds, student loans, mortgage, and car payments. This portfolio helps them to get the big picture about their financial situation. Similarly, a customer portfolio can help a business get the big picture about its customer base.

For example, a dry cleaning business might have a customer portfolio with the following groups:

  • Individuals and walk-in customers
  • Big corporations
  • Public schools
  • Restaurants
  • Hotels

The Coca-Cola brand, for instance, details some of its customer portfolio on its website, referring to its partnerships with ''large international chains of retailers and restaurants and small independent businesses.'' By understanding who its customers are, Coca-Cola is able to do just about everything better: marketing, support services, improving sales, anticipating needs, and creating business solutions.

Customer Portfolio: Components

So what's in a customer portfolio anyway? Is it just a big list of business categories and names? Hardly. Here are the important components that help you better understand who you work with.

1. Customer Analysis and Behavior

If you're trying to figure out how your customers select products or why their processes are the way they are, you need to do a customer analysis. A customer analysis helps break down who your customers are in terms of demographics, psychographics, and behavioral patterns. Demographics might include the age of a business or the gender or racial makeup of its workforce. Psychographics, on the other hand, take into account opinions, attitudes, and aspirations. Behavioral patterns might include how a customer makes decisions or influences other customers. Combined, this information helps build a profile of your customers.

2. Marketing Audits

A marketing audit is a way to examine a business' products or services and how they relate to the customer. It should include information on how you want to solve a customer's needs and characteristics of the marketplace and how to succeed in it. It may also take a closer look at the competition and how it stacks up as well as a look at your industry in general.

3. Customer Profitability Analysis

Customer profitability analysis is a tool used to determine who are and aren't your profitable customers. All businesses have customers who are less profitable for the bottom line than others. This exercise helps businesses determine the customers they want to attract, retain, and grow. The profitability analysis looks at both the revenue streams from customers and the costs associated with certain customers or groups both day-to-day as well as over the life of the relationship.

4. Customer Retention and Loyalty

We're all familiar with customer loyalty: those feelings and experiences that keep us going back to a brand over and over again. In a customer portfolio, looking at customer loyalty is an examination of the likelihood of a customer to go elsewhere. It may also include churn rate, which is the number of customers who do leave.

Customer Portfolio: Importance

A customer portfolio is a tool in the toolbox for business owners and managers. They have numerous benefits of strategic importance for a business.

To unlock this lesson you must be a Study.com Member.
Create your account

Frequently Asked Questions

How do you create a customer service portfolio?

To build a customer service portfolio, the first step is to collect data related to the company and its customer base. It is important to align actions with the company strategy and include all necessary details. Details to include are the company's name, industry, product information, average revenue, and any other important details.

What is a customer portfolio?

A customer portfolio is a detailed document that describes the customer groups that the company does business with. The document helps businesses understand the attributes of its customer base.

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