1. Managing Customer Profitability Chapter 6

2. Customer profitability  Applying ABC to customers or customer groups  Customer is the “cost object”  What activities are performed to service customers?  Can the activities be managed?  What costs are related to serving individual customers or groups?

3. Customer profitability

4.  Financial considerations  Profit  Pareto principle (80/20 rule)  Which customers fall into which group?  A large market share is not always best  Return on sales  Profit (or loss) / sales

5. Customer profitability

6.  When to keep unprofitable customers  New customer  Possibility of converting them to a profitable one  Improve efficiency  Reduce activities  Menu-based pricing  Nonfinancial considerations  Opportunity to learn  Prestige  Entry into new market