uncover all your customer-facing activities - especially the hidden ones
A big customer is better than a small customer. Right?
Depends. Big customers demand better deals, they demand more of your time.
Cost of sales is not just the sales executive’s time and the discounts that you allocate to a customer. It’s all those phone calls, time spent at the counter, chasing payment..........
Do you know exactly how long customer ‘x’ ties up your front-office staff?
To maximise profit, we need to understand that customers are a cost of sale, so find out how much each one costs you.
Customer Profit Drivers will:
What is your return on investment in your customers?
Customers are a cost of doing business.
Some are good investments, some aren’t.
Find out how much money your customers are earning you or losing you.
Half of your customers are probably costing you money
Time after time research tells us that businesses could add fifty per cent to their profit line by understanding the true costs of their customers.
Geoffrey Colvin, editor of Fortune magazine, finds again and again that a company typically earns 158 per cent of its profits from its top 20 per cent of customers. And loses it on the bottom 20 per cent.
Every time you sell a chunk of your production - steel pressings, marketing services, booklets, stamps - you create transaction costs to add to the cost of what you produced: set up costs, invoicing, delivery. These are wrapped around the cost of what you provide and cost the same for each individual transaction.
What is important to you is not how much they buy over a year, but how they buy it.
map the underlying processes
look at how much resource each one uses up
clarify how much you do for which customers
tell you how much each customer really costs you
Do you work for yourself or do you work for your customers?