Unprofitable Customer

Will This Customer Sink Your Stock? Heres the newest dash to grab competitive advantage: Figure out how lucrative your customers really are. FORTUNE Sunday, September 15, 2002 By Larry Selden and Geoffrey Colvin Who are your fruitless customers? We recently asked that question of top executives at one of the Statess biggest retail merchants. They responded defiantly that they had no un gainful customers. Understand that this company was in trouble--it wasnt even earning enough to cover its cost of capital, Wall thoroughfare analysts were beating it up, and its stock was performing worse than the shares of most competitors. nonetheless its leaders insisted that through some dark financial voodoo, millions of profitable customers somehow added up to an unprofitable company. The truth--which shocked them--was that some of their customers were late unprofitable. Simply doing business with certain customers was reducing the firms remuneration and shareholder value. Other customers were fabulously profitable-- merely the effect of the bad-news buyers was overwhelming them. The retailers managers didnt understand any of this.

They didnt understand that their customer strategy--their whole programme for acquiring, maintaining, and developing customers--was determining their customer profitability, and crucially, that their customer profitability was in turn determining their share price. Because the company didnt understand these connections, it was, among early(a) serious errors, aiming marketing efforts at customers who werent profitable and probably never would be. Heres how ridiculous the situation was: This company was actually consumption money to bring in customers who were reducing the value of the firm. take hold of ready for a big idea thats about to dishevel through most companies: managing the enterprise not as a collection of products and services, not as a (Illustration: Brian Stauffer) group of territories, but as a portfolio of... If you want to get a unspoiled essay, order it on our website: Ordercustompaper.com

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