Using analytics to determine what variables differentiate high from low profitable customers.
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.
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.
The following have contributed to this page: Mr Gary Cokins