Customer and Product Profitability

Do you know which customers and products are profitable and which are not?

Most companies will claim that they do, but often this picture is drawn from an incomplete understanding, looking only at the direct and/or variable cost. Sounds familiar?

In reality, customers and products pull differently on the activities performed across the entire value chain. And with the increasing amount of resources that are indirect, it’s fundamentally important to understand what drives these. With insight into the true customer and product profitability, you will be able to make the right commercial business decisions.

Truly data-driven Companies are winning

It’s becoming increasingly important to leverage data to optimize business results. This cuts across the value chain and incorporates traditional production and distribution metrics. Sales and marketing metrics are becoming increasingly important, e.g. understanding customer journey data on path-to-purchase, promotion uplifts or ROI on different marketing campaigns.

Often a lot of data are being collected and stored, but the ability to “convert” the data into insights and sharing these in an actionable and structured way is lacking.

“There is a lot to learn from best-practice companies in terms of their “Operating model” for working with data and getting tangible guidance out of this”

[Henrik Ravn Christensen]

Key Performance Indicators

Another interesting topic, where there is often quite a lot of improvement potential is KPI.

Do you have the right balance between leading and lacking KPIs, between company and employee impactable KPIs? Are the KPIs aligned with your strategy? Do they reflect the value drivers of the company?

Often KPIs are more used for bonus models and profit sharing. This is a shame. In best-practice companies, the KPIs are truly enforcing the strategy. In this way the KPI structure becomes a true profitability driver or growth driver depending on the strategy.