What is it about?
For the few companies who have calculated product, service-line, channel, and customer profitability (using activity-based costing [ABC] principles), they would next want to know how to determine what variables differentiate high from low profitable customers … other than sales volume and mix. This paper explains how to do this … using recursive partitioning with decision trees.
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Why is it important?
Customers now view supplier offerings as commodities. To be competitive suppliers need to provide differentiated services to microsegments of their customers. They therefore need to know the costs and profit margins of their customers to determine their price discounts, offers, coupons, and deals to increase the profitability from their customers.
Perspectives
Many CFOs continue to use management accounting practices from the 1960s. They need to get into the 21st century using progressive accounting methods including activity-based costing (ABC). ABC can be easily implemented using a rapid prototyping with iterative remodeling approach. Crawl, walk, run, and fly. Start with the “crawl” to accelerate learning and buy-in.
Mr Gary Cokins
Analytics-Based Performance Management LLC
Read the Original
This page is a summary of: From Bean Counters to Bean Growers: Accountants as Data Analysts—A Customer Profitability Example, Journal of Information Systems, September 2015, American Accounting Association,
DOI: 10.2308/isys-51180.
You can read the full text:
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