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Managing Customer Profitability

Managing Customer Profitability. Chapter 6. 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?.

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Managing Customer Profitability

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  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. Customer profitability • 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. Customer profitability • 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

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