Solutions  Customer Profitability Analysis

Customer Profitability Analysis

"Assess the profitability of your product lines. Your next job is to determine which of your products or services are making money (or not), and why...Activity-Based Costing will give you a more accurate picture than you or your predecessor may have had in the past."

The new leader's guide to diagnosing the business - Harvard Business Review February 2008 by Mark Gottfredson, Steve Schaubert, and Hernan Saenz.

"The top 20% of customers typically account for 120% of profit. Winning with the top 20% will kill your competitors. Not dealing with the bottom 20% will kill you."

Killer Customers - Larry Selden and Geoffrey Colvin.

Profitability Analysis, in particular Customer Profitability, is important in identifying where a company is really making money or indeed, where it could be losing money.  It helps to focus efforts on improving profitability from certain customer segments while ensuring non-profitable customers and/or segments are exposed to management.

ACE on-Demand

With ACE on-Demand you can create very detailed cost models.  Generally we would suggest using high level activities in a profitability model but use fine detail for products/services or customers.  ACE on-Demand allows multiple value items to be flowed through a model.  In the case of profitability models it is possible to include both expense and revenue in the same model.  This means that the final products of your model – customers, products or services – can be defined in terms of both full cost and revenue.  This allows profitability analysis to be conducted within an ACE on-Demand model, greatly simplifying analysis.

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