Question

Customer Percent 25% 35% Customer Revenue (Customer Sales) 1200 800 Retenti Custom Margin Gross Profit on Cost er Profit 60% $720 $100 $620 50% $400 $100 $300 Customer Satisfaction Very Satisfied Satisfied Somewhat satisfied Somewhat dissatisfied Dissatisfied Very Dissatisfied 20% 300 40% $120 $100 $20 15% 3% 2% 40% 40% 40% $32 $24 $20 $100 $100 $100 -$68 -$76 -$80 $249.9 WEIGHTED Average 654.8 48.50% $350

How would average customer sales and average customer profit change for a business with 10% very satisfied customers, 35% satisfied and 55% somewhat satisfied?

( i don't understand how it affects the weighted average profit margin please explain in details)

Answer 1

Taking the given values, we get the following table of new average customer sales and profit:

customer satisfaction	customer percent	revenue(customer sales)	margin	gross profit	retention cost	customer profit
very satisfied	10.00%	1200	60.00%	720	100	620
satisfied	35.00%	800	50.00%	400	100	300
somewhat satisfied	55.00%	300	40.00%	120	100	20
somewhat dissatisfied	0.00%	80	40.00%	32	100	-68
dissatisfied	0.00%	60	40.00%	24	100	-76
very dissatisfied	0.00%	50	40.00%	20	100	-80
weighted average		565.00	45.50%	278.00		178

in excel , to calculate the weighted averages, use the following formula

=sumproduct(customer percent column,revenue column)/sum(customer percent column) , which will give weighted average revenue.

similarly, we need to proceed for gross profit and customer profit.

Now, we can see that with new data for customer satisfaction percentage of people, the average sale per customer has fallen to $565 and average profit has fallen down to $178 per customer. this is due to the fact that there are lesser number of people(10%) in the very satisfied customers where the revenue per customer is the highest($1200).