Are All of Your Customers Profitable and Valuable to You?

Abstract

Customers are increasingly viewing the product and standard service-line offerings from suppliers as commodities. As a result any competitive edge from their offerings is neutralized. To compete suppliers must provide differentiated services to different types of customer segments. However, this means suppliers need to know how profitable, currently and potentially, their customers and prospects are in order to know which types of customers to retain, grow, win-back and acquire as well as how much to optimally spend doing these for each type of customer segment. Most accounting systems fall short providing this information below the product gross profit margin line. What is needed is a profit and loss income report for each customer segment, and ideally for each customer.

Notes

i. William B. Castenholz, “The Application of Selling and Administrative Expense to Product,” National Association of Cost Accountants (NACH) Yearbook, 1922.

Additional information

Notes on contributors

Gary Cokins

Gary Cokins (Cornell University BS IE/OR, 1971; Northwestern University Kellogg MBA 1974) is an internationally recognized expert, speaker, and author in advanced cost management and enterprise performance and risk management systems. He is the founder of Analytics-Based Performance Management LLC, an advisory firm located in Cary, North Carolina (http://www.garycokins.com). He began his career in industry with a Fortune 100 company in CFO and operations roles. He then worked 15 years in consulting with Deloitte, KPMG, and EDS (now part of HP). From 1997 until 2013 Gary was a Principal Consultant with SAS, a leading provider of enterprise performance management and business analytics and intelligence software. His two most recent books are Performance Management: Finding the Missing Pieces to Close the Intelligence Gap (ISBN 0-471-57690-5) and Performanc e Management: Integrating Strategy Execution, Methodologies, Risk, and Analytics (ISBN 978-0-470-44998-1). His most recent book is Predictive Business Analytics (ISBN 978-1-118-17556-9), published by John Wiley & Sons. Mr. Cokins can be contacted at. Linkedin.com contact: http://www.linkedin.com/pub/gary-cokins/0/15a/949