Increasingly companies are beginning
to recognize the potential of measuring customer profitability. In strategic
and global account management this metric is vital because the cost of
servicing customers is high and it is all too easy to turn a profitable
customer in an unprofitable one.
The concept of measuring customer profitability is powerful and relatively
straightforward; the problem is how to do it.
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Time Driven
Activity Based Costing an answer
Very few accounting systems are structured in way that will measure the
profitability of individual customers. Although it may be possible to measure
gross margins, to find the actual profit gained from each account it is
necessary to know how much time and resources have been spent supporting and
developing the business relationship. How to do this is known, and one method
is Activity Costing (ABC). Originally a rather bureaucratic process, a new
approach called Time Driven Activity Based Costing*
is making the whole process lot easier and viable.
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| * Time-Driven
Activity-Based Costing, Kaplan, Robert S and Anderson, Steven R, Harvard
Business Review, Nov. 2004. |
The problem is how
do use it to drive-up profitability
Measuring customer profitability is one part of the exercise, the second is how
do you apply this important profitability data to ensure your account teams use
it to protect and drive up customer profitability.
Because RM3 has been developed to support modern account management it has the
ability to apply customer profitability data in a way keeps your account teams
focused on this ultimate performance metric . |
The Contribution
function
RM3 has a whole section devoted to customer profitability; it is called
'Account Contribution', which takes the cost data generated from an ABC or
similar method and presents it to account teams in a meaningful way. Account
teams can immediately see the profitability, the revenue received and a break
down of costs incurred. It is presented in way that enables account teams to
plan and set targets for customer profitability. RM3 will also monitor your
account team’s progress against account profit goals and inform you if they
deviate beyond set limits.
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At last the
entrepreneur account manager
It has been said that measuring account profitability is the final element that
will enable account managers to manage their accounts as business, become the
entrepreneurs so many say they should be. However they can only do this if they
have the account management equivalent of the financial planning system
available to the head of any business, RM3 gives your account teams such a
system
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| RM3 : The means to enable the
entrepreneur account manager
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