Blog · Board and management reporting
How to measure revenue concentration across product lines from the ledger, the same three measures used for customers, top-n share, the count to half and the index, applied to products, the tail of lines that together earn little, the customers who buy only tail lines, and the two decisions the tail forces: which lines to keep because a core customer needs them and which to retire because nobody does.
A product catalogue grows by addition. Every line was added for a reason and none is removed, because nobody knows who would notice. The ledger knows. This guide applies the concentration measures to product lines, sizes the tail, and lists who buys it, so the decision is about customers rather than SKUs.
Per period, across product lines:
Top-n share = revenue from the largest n lines ÷ total Count to half = lines, largest first, to reach 50% of revenue Tail = lines below the stated threshold; tail share = their revenue ÷ total
Per tail line:
Buyers, ranked by the buyer's total revenue; the tier of the largest buyer
Identifiers only.
Σ lines' revenue = ledger revenue = Σ customers' revenue
A ledger line with no product code fails it and is listed; those are usually service or adjustment lines, and they are excluded from the concentration with a count.
| Measure | This year | Last year |
|---|---|---|
| Lines with revenue | 1,840 | 1,720 |
| Top 10 share | 44% | 46% |
| Count to half | 14 | 13 |
| Lines to reach 95% | 310 | 290 |
| Tail lines | 1,530 | 1,430 |
| Tail share of revenue | 5% | 5% |
The tail grew by a hundred lines and still earns five percent. The question is not whether to cut it; it is which of the fifteen hundred lines a customer who matters would miss.
| Tail line | Revenue | Buyers | Largest buyer | Buyer's tier | Reading |
|---|---|---|---|---|---|
| L-2207 | $8,000 | 1 | Customer 4471 | Tier 1, $410,000 | Keep: part of a top account |
| L-4471 | $6,000 | 14 | Customer 9034 | Tier 4 | Retire, or consolidate |
| L-9034 | $11,000 | 3 | Customer 1187 | Tier 3 | Review with the rep |
| L-1187 | $300 | 0 in 12 months | Retire |
Line L-2207 earns eight thousand dollars and is bought by a customer worth four hundred thousand. It is not a tail line; it is a line item in a relationship. Line L-4471 is bought by fourteen small customers who could take an alternative, and the report suggests which.
Cut by revenue alone. The top account's odd line goes and the account manager finds out from the customer.
Lines and SKUs mixed. The board sees lines; the decision needs SKUs.
Tail threshold moved. The tail's size cannot be trended.
Cost to hold ignored. A tail line with no stock and no maintenance costs nothing to keep. Where the cost is known, it ranks the retire list.
Mapped once, the ledger, the product master and the customer master produce the concentration measures, the tail and the buyer list per tail line every quarter. Covirage builds this from the exports as they are. The board reporting solution describes the setup, and the customer concentration guide covers the same three measures on the other axis.
The measure works at either level, and the report says which. Lines for the board view; SKUs for the rationalisation decision, because the tail lives at SKU level and the customers who depend on a specific SKU are the ones who will notice.
Below a stated share of revenue, say a tenth of a percent, or outside the lines that together make up 95 percent. The threshold is on the report and the same each period, so the tail's size can be trended.
From the ledger: the tail line's buyers, ranked by their total revenue with the company. If a top-tier customer buys it, the line is part of that relationship and the decision is about the customer, not the line. The report shows the buyers; the category manager decides.