• Service: Advisory, Management Consulting, Financial Management
  • Type: Business and industry issue
  • Date: 23/11/2012

CFO Insights

CFO Insights
This series provides a perspective into financial management, and assists the finance function to create measurable value for their business.

CFO Insights 5: Understanding customer and segment profitability 

Understanding the true profitability of your customer isn’t always as straightforward as it appears to be. Your top tier clients may not be the most profitable, particularly as they tend to ask for the biggest discounts for products or services. Unless you understand your customer base and the cost to service them you may be making the wrong pricing decisions.

Key insights

  • Experience suggests 20-25 percent of customers generate the 'potential' profits.
  • 20-25 percent of customers are distinctly unprofitable and reduce 'potential' profits.
  • In order to enhance profits, the focus is on improving the manner in which to service or price unprofitable clients.