Understanding Customer Profitability

9 Mar 2010
9.30am-5.00pm
Newforge Country Club, Newforge Lane, Belfast

“No profit grows where is no pleasure ta'en In brief, sir, study what you most affect.
William Shakespeare (1564 - 1616)

INTRODUCTION

Often, the most effective way for a business to improve its profits is to focus on reducing the losses it incurs from its unprofitable customers. Profit erosion equating to between 50%-200% of final profits is cited in studies as ‘typical’ for the bottom 10% of customers, i.e. the most unprofitable customers. The problem is many businesses can’t readily distinguish between customers that add to their profits and those that detract from them. Traditional accounting methods provide little help in calculating profitability at individual customer level. Customer Profitability Analysis (CPA) has therefore become an important tool in helping businesses both identify their ‘profitable’ and ‘unprofitable’ customers and understand why that difference is.

WHY ATTEND?

The aim of this one-day workshop is to explain CPA and how it can be used as a tool to help improve profits, and to identify the main issues associated with undertaking your own CPA project.

AGENDA

• An overview of Customer Profitability Analysis: What it is, why it is needed and how it can be used to highlight both the key factors that contribute to profits and those that erode them.

• Getting started on your own project: Establishing the need and readiness for a CPA project; forming a project team; selecting a period for analysis; building a project plan and controlling the project.

• Activity Based Costs: Principles and background; identifying the processes; establishing process/activity pool costs, collecting activity ‘times’ and weightings; calculating activity costs.

• Building the model: Thinking ahead to the analysis structure from the outset; capturing and reconciling the transaction data (sales invoice, credit note/debit note data at invoice line level).

• Analysing the data and creating an increased awareness: Thinking-through what it is you need to know to understand what is profitable, what is unprofitable, why that is – and the tipping points at which ‘unprofitable’ becomes ‘profitable’.

• Constructing and interpreting the Whale Curves for your business: Illustrating the potential profit of your business; the level of dependence upon its profitable customers; the profit erosion due to its least profitable/most unprofitable customers and transactions - and the total potential (£) for profit improvement.

• Using the 4-Box Segmentation Model for generic action planning: Sorting customers into one of four categories according to their fit with your strategy and their contribution to the profits of your business.

• Creating the ‘Opportunities for Improvement’ Check-List: What, how much (the opportunity - £), why, and the ‘critical few.

WHO SHOULD ATTEND?

The ‘broad but shallow’ approach adopted by this workshop makes it suitable for managers from different disciplines and with different responsibilities. It will prove beneficial to managers responsible for the profitability of their business, finance/accounting professionals, marketing decision makers and analysts, business improvement specialists and others who have an active interest in radically improving the performance of their business.

FEE

Members of the Centre for Competitiveness £275 + VAT
Non Members £350 + VAT

REGISTRATION

Space at this event is strictly limited and will be allocated on a first come first served basis.

IN HOUSE OPTION

This workshop can be delivered in-house on its own or as part of a wider improvement project. Please contact us for further information.