2004 Banks and technologies

Financial Management Practice: Calculating Customer Returns

important technology financial analysis bank is to analyze the profitability of customers. Having historical and current information about the profitability of clients, the management and shareholders of the bank can draw conclusions from:

• which clients and their groups (by industry, affiliation, etc.) brought in the main income,
• what are the dynamics and trends of profitability by clients and their groups,
• how customers react to innovative banking products and services,
• what is the efficiency of the work of client managers in the Head Office (VIP clients) and in branches.

As a rule, the profitability of the bank is decomposed into the following objects management accounting and analysis (in order of detail), see Figure 1:

1. profitability of Business units - branches, subsidiaries, affiliated enterprises;
2. profitability of Profit Centers (points of sale);
3. profitability of banking products and services;
4. customer profitability.

Fig.1 Hierarchy of bank profitability objects

Unfortunately, the accounting model for accounting for profitability, proposed by the Bank of Russia on the basis of symbols 102 of the form, does not allow us to present bank profitability in the required form. Therefore, many Russian banks are forced to independently develop their own technologies for accounting for the profitability of clients.

The purpose of this article is to talk about the technology developed by TrustConto and Intersoft Lab for analyzing the profitability of customers, implemented in the BPM-system "Contour Corporation. Financial Management". At present, the described technology has been implemented in a number of large commercial banks in Russia and Kazakhstan.

Banking economic model of customer profitability

The banking economic model of the client's profitability is described by formula (1):

(1) EP = SPD + SR + SKD + STD - HP, where

EP - economic profit from the client,

SPD - the balance of direct interest income from the client,

СР - the balance of the movement of reserves on credit positions of the client,

SKD - the balance of commission income and expenses received from the client,

STD - the balance of transfer income and expenses on attracted/placed client resources,

HP - customer service overhead.

The calculation of the individual components is carried out as follows:

(2) SPD = Direct interest income- Direct interest expense

(3) SR = Recovery of reserves - Creation of reserves

(4) DCI = Direct Fee Income - Direct Fee Expense

(5) STD = Income from internal placement of client liabilities - Expenses for funding active transactions with the client

For an adequate assessment of the client's profitability, it is necessary to compare the received ES with the risk of unexpected losses on operations with this client (6):

(6) VR = EP/R*100%, where

RR - return on risk;

P - the total risk for all client transactions, reflects the need ("appetite") for economic capital.

Technology for calculating customer profitability in a BPM system

To analyze the profitability of clients, it is necessary to have access to information about clients, transactions with clients, and current volume and income-expenditure positions for each client transaction. In a large multi-branch bank, data on clients and their transactions is scattered and stored in separate databases: in an automated banking system, in a CRM system, in specialized modules and applications for recording transactions. Therefore, initially, information should be collected, and only then - to calculate the profitability.

International and Russian experience shows that the use of specialized BPM-systems based on the technology of data warehouses is most suitable for solving this problem. On the one hand, classic BPM systems provide automated technology support. financial planning and budgeting, management accounting, cost and profitability calculation, transfer pricing. On the other hand, the implementation of a BPM-system based on the Data Warehouse makes it possible to carry out calculations based on primary accounting and analytical information collected from diverse sources.

Next, we will consider in more detail the technology of automated calculation of profitability using a BPM system. Let's illustrate the implementation of the calculation of profitability for the Central Federal District, banking products and customers using the example of the system "Contour Corporation. Financial Management".

Requirements for initial information for calculating the profitability of clients

To calculate the profitability, information about clients and primary data must be uploaded daily from the bank's accounting modules to the Data Warehouse of the BPM system. accounting. The uploaded data must meet certain requirements. Firstly, the bank's accounting department must ensure the opening of accrued income and expense accounts for operations with clients (328, 475, etc.) in the context of clients. Secondly, in the accounting modules of the banking system in each memorial order to reflect income and expenses on accounts 701 and 702 in without fail the client code must be entered.

In addition, a number of transactions in the bank can be recorded on consolidated accounting accounts, and analytical accounting for these transactions can be maintained in external systems. As a rule, this retail business- deposit operations, lending individuals, operations with plastic cards. For such operations, in addition to the accounting information, it is necessary to upload to the Storage all analytical sub-accounts to the consolidated accounts of income and expenses of accounting. When unloading, it is necessary to indicate the client code in each sub-account and / or postings to these sub-accounts.

Requirements for the composition of additional attributes of the client card

To ensure the issuance of reports on customer groups, it is necessary to develop a procedure for filling in the ABS or directly in the BPM system for additional attributes of the customer card. Among the additional attributes of the customer card may be the attributes indicated in Table 1.

Table 1. Additional attributes of the client card.

The main stages of calculating the client's profitability

Stage 1. Calculation of the flow of direct income and expenses for customers

Based on the accounting and analytical information uploaded to the Warehouse, the BPM system calculates the flow of direct income and expenses for customers. For example, in the system "Contour Corporation. Financial management For this, a special markup of accounting entries for income and expense accounts is used.

The daily flow of direct income and expenses is presented in the form of table 2.

Table 2. Flow of direct income and expenses by clients

Based on the flow of direct income and expenses, indicators of SPD, SR, SKD for each client are calculated.

Stage 2. Calculation of the flow of transfer income and expenses

Loan to the calculated direct income and expenses are added adjustments to the STD.

For example, to calculate STD in the BPM-system "Contour Corporation. Financial Management" the mechanism of transfer transactions is used. Transfer transactions are automatically generated by the system based on the movement of resources on term client accounts. A transfer transaction describes the movement of a bank's internal resource flow between passive Profit Centers, the Treasury and active Profit Centers.

The transfer transaction has the form indicated in table 3.

Table 3. Attributes of a transfer transaction

Transfer transactions for a period of 1 day are created for client accounts with a demand term. For some client accounts, you can specify a minimum balance. For such accounts, two transfer transactions will be created daily: one for the term minimum balance, the other for the difference between the current account balance and the minimum balance.

On the basis of transfer transactions, the flow of transfer income and expenses on client accounts is calculated and the STD indicator is calculated. The flow of transfer income and expenses is presented in Table 4.

Table 4. Flow of transfer income and expenses

Stage 3. Calculation of overhead costs for customer service

To calculate the total profit for a client, the costs of servicing the client by the bank's operating divisions are added to the received flows of direct and transfer income and expenses.

The universal technology for calculating HP has not yet been established. We propose to use a methodology in which the basis for the distribution of direct and indirect costs of the Profit Center to customer accounts is the integral indicator TrO. The TPO indicator is calculated by multiplying the number of postings on the client's account by the conditional coefficient of the complexity of the operation. The unit of labor intensity is the time of the operation for processing the client's payment order.

Stage 4. Calculation of the risk of unexpected losses on client transactions

To calculate the risk (ie the amount of unexpected losses) P, we recommend using the method of weighting the client's assets by the risk factor, similar to the calculation of the capital adequacy ratio H1. We suggest that banks start with this methodology due to its simplicity and clarity of calculations, and further develop it by applying the VaR (Value-at-Risk) calculation method for each active client transaction.

Get customer profitability reports with multidimensional OLAP cubes

The report on the profitability of clients is essentially an analysis of the generated income and expense flows, presented in the form of a single set of attributes (see tables 2, 4).

Therefore, it is advisable to use dynamic OLAP reports as a reporting tool. The simplest OLAP tool is the Pivot Table tool integrated into MS Excel. The "Kontur Corporation. Financial Management" system uses an industrial solution - the OLAP client "Kontur Standard" (manufactured by English company Contour Components Ltd., which, together with TrustConto and Intersoft Lab, is part of the international group of companies Intersoft Company Group). "Contour Standard" allows you to process tens of millions of unique records online, which makes it possible to prepare and analyze reports on the profitability of bank customers fast, visual and convenient.

Dynamic reports on profitability are built on the basis of a multidimensional microcube, into which flows of direct income and expenses of clients and flows of transfer income and expenses are loaded daily from the BPM system.

The main analytical sections of the microcube are:

• date of receipt of income / expense,
• client code and name,
• the main attributes of the client, downloaded from the banking system,
• additional attributes of the client from the BPM system,
• banking product,
• profit center,
• an account that records income/expenses,
• corresponding account,
• items in the management income statement, etc.

Microcube Facts:

• the amount of accrued income and expenses,
• the amount of income and expenses received.

Examples of microcube-based reports are shown in Figures 2 and 3.

Rice. 2. Presentation of profit center profitability by customer

Fig.3. Profitability of clients by Profit Centers

As a formal report on the client's profitability, we suggest using the following report form:

Based on the report given in the example, for example, it can be concluded that despite the fact that Client 2 brought more economic profit(EP), the profitability (VR) of Client 1 is higher due to the lower risk of unexpected losses (P).

Benefits of Using Yield Calculation Technology

The methodology for assessing profitability described in the article has been implemented in a number of major Russian banks. Based practical experience implementation and operation, we can say that the use of this technology allows the bank to obtain the following benefits:

1. Conduct daily customer earnings calculations. Based on daily calculations, receive reports for any period.
2. To improve the accuracy of calculating the profitability of clients by including management adjustments in the methodology - transfer prices and distribution of overhead costs. The correlation of economic profit and risk allows you to get an objective assessment of the client's profitability.
3. Dramatically reduce the labor costs of performers by automating the processing of unlimited volumes of primary accounting documents and analytics in BPM systems.

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How to identify low-margin customers. Sales analysis by clients, managers and departments

I suggest that you analyze sales in the context of customers, managers and departments in accordance with the basic provisions of the Margin Analysis.

We divide all costs into fixed or indirect (not dependent on sales volume and not attributable to this client) and variables or direct (customer-specific).

If accounting at your enterprise is maintained in the 1C program, then you can easily generate a sales report in the context of customers and managers. If any of these features are not configured, please refer to system administrator, or modify the report manually in Excel .

If such accounting is not kept at all, immediately start keeping it, because. its data will allow you to organize the work of your company more efficiently.

We will focus on the fact that we have data the following kind and we are going to fill it with the indicators indicated in the header in order to calculate net profit each client:

As a rule, the first three columns are easily obtained information.

As for direct costs, each company independently determines their composition.

We will take the following:

• salaries and UST of managers;
• retro bonuses, marketing payments;
• deferment of payment.

Naturally, you can expand the list based on the specifics of your company.

Salaries and UST of managers

C salary and ESN everything is quite simple. This data can be provided by the accounting department.

As for the method of distribution of salary and unified social tax among clients, you yourself decide on what indicator it is advisable to distribute them.

We will distribute this indicator by revenue in proportion to the share of sales of each client in the total sales of the manager for the period, because. the bonus is paid from the proceeds:

The proportion will be:

manager's sales = salary + unified social tax of the manager

sales of client n = x (share of salary + unified social tax per client n)

If there are many clients, you can use absolute references in Excel when creating a report.

Retro bonuses, marketing payments and minimum balance

Data on retro bonuses and marketing costs in trade are usually collected on accounts 44 and 91.2 (check with accounting). Also check whether all invoices for the period were issued and posted in 1C.

If yes, feel free to use this data in the report.

If some data is not available or they have not been carried out, it is possible to calculate the planned indicator based on the retro bonus rates provided for in the contract.

The so-called irreducible balance of debt can be attributed to this type of cost. For example, your agreement states that you are lending to a client in the form of a minimum balance of his debt in the amount of 1 million rubles.

In this case, the amount of lost profit will be calculated based on the bank interest rate, because. you could put that money in the bank and earn interest on it:

Lost profit = Minimum balance * bank interest/ 365 * Number of days in the period

If some entrepreneurs, before doing business, calculated its profitability, perhaps they would choose the second path, or in addition another industry.

Profitability is the main component of the business model

The cash ratios section of any money management book begins with the profit margin. Obviously and elementary, you say. Unfortunately, in order to have opinions held by many entrepreneurs, and quite often they do not calculate the profitability ratio at all, not to mention its classifications and subspecies. The result - the capital is put into the wrong business, the expected income is not taken.

What if, in addition, he was taken, the boss, who did not calculate the profitability, deprives himself of a fairly significant managerial tool.

In fact, and no one can dispute this, profitability is one of the basic components of any business model. It is on this basis that it is forbidden to build and translate into the destiny of a company's development strategy without taking into account profitability indicators and understanding the mechanisms for managing them.

So, profitability is the coefficient of long-term viability of the company. There are three main types of profitability ratios: return on sales, profitability and return on assets. equity. Then about each in detail.

Profitability of sales

In simple terms, the return on sales indicator tells you how many sales a company receives per financial unit. This coefficient is calculated in two ways: by dividing either net profit by net sales, or - gross profit by net sales:

return on sales = net profit = either net sales

gross profit. pure implementation

Net profit - profit after the deduction of all costs, gross - profit after the deduction of only the cost of goods sold.

The figure taken by dividing the gross profit can be called more indicative for several reasons. Firstly, the net profit indicator does not always reflect the real picture of the processes taking place at the enterprise. As already mentioned, it is formed with the deduction of all costs, and the latter are often overestimated in order to optimize taxation.

Secondly, the figure obtained by dividing the gross profit reflects the true percentage of the average markup of the enterprise.

Informative besides this, the comparison of two indicators - by net and by gross profit. If the rate for gross profit is higher than for net profit, it means that the majority of the enterprise's profit is formed at the expense of non-core activities.

Comparing the rates of return of two firms operating in the same market can tell which one focuses on the size of the markup, and which - on the speed of turnover.

There are no clear and necessary standards for this indicator. It is possible to state that for manufacturing firms the usual profitability of sales is not less than 0.15-0.2; 0.03-0.05 is enough for distributors; for retailers - 0.10-0.15. But these figures are very dependent on the kit. external factors, therefore, one should not strictly focus on them.

Return on assets

This indicator indicates the profit per financial unit invested in assets, i.e. on the effectiveness of the use of funds put into assets. It is considered to be the division of net income by the average amount of assets:

return on assets = net income =. average assets

From time to time, for greater clarity, the denominator is taken not just the price of all assets, but the net one, in other words, after the deduction of all current liabilities. This indicator indicates how effectively the company uses the assets in operation. The profitability of the company's assets tends to decrease when the company attracts credit funds.

At a time, at a time when the company, having taken the loan, has not yet managed to increase the number of sales, the return on assets will decrease.

Return on equity

The most serious indicator of how correctly and effectively the owner is invested. It is considered a way to compare net income and average equity: return on equity = net income =. average personal capital This is the only indicator that has a clear standard - profitability similar businesses or the simplest analogue - the average bank interest on deposits.

In order for the return on equity ratio to really let the owner realize how well he invested, it is necessary to compare businesses with the same level of risk.

clients.

Supplier Profitability

Analyzing the reports of suppliers, "monitoring" indicators of its profitability, companies in most cases try to find the answer to the question: is it too much a large number of the supplier receives on them, in other words, does he cheat. From this point of view, the return on operating income and fixed capital are especially fascinating.

The client has a direct impact on the profitability of the main capital of its own suppliers. The agreed selling price is reflected in the level of profitability of the operation, and the requirements for credit terms and warehousing conditions are reflected in the methods of using the supplier's own assets.

Therefore, in order to get an answer to the above question, it is worth asking the supplier's return on equity figure, the reasons and dynamics of its improvement, and calculating the impact of your own order on the upcoming profitability trend. This is a normal workflow, in the end, you are partners and no one is deceiving anyone, right?

Profitability is not current assets supplier (profit / amount of fixed assets), or rather, its transformations indicate the following: a drop in the indicator indicates that the company is inefficiently using assets and not loading resources into full force. An increase in the indicator, on the contrary, indicates that the assets are being used correctly. But in the near future, the company may face the problem of insufficient capacity.

Where to get these?

Customer Profitability

We need an analysis of the profitability of a client or partner in order to determine whether he has opportunities, increase or decrease the amount of his income.

The first thing we should be interested in in a client's financial statement is the profitability of that part of his business to which domestic supplies are directed, and how it compares with other segments of the company's activities. In full measure, of course, that the capital and main forces in most cases are concentrated in those areas, the profitability of which is the highest. Respectively, comparative analysis indicators gives us data on which division of the company will be closed or implemented in the near future, and which, on the contrary, will develop and grow at an active pace.

Having examined the figures of the amounts of income, profit before payment of current current assets and liabilities of the client, we can calculate the profitability indicators for individual areas of the company's activities, as well as in the context of its work with regions.

In simple words, we will notice where the client's money comes from. When decomposing the client's return on equity into internal components, it is worth paying attention to how stable the operating profit figure is. One should not hope for the stability of profit from the sale of non-current assets or subsidiaries - these are one-time successes. If the client is trying to improve profitability, and we offer him a popular product, he will, of course, receive price discounts.

The second case - in order to increase its own profitability, the client tries to use assets more efficiently. It is worth offering him, for example, equipment or equipment that will help for a longer time.

Rival profitability

Of all the profitability ratios of rivals, the most informative figures are return on equity and operating income. In most cases, profitability ratios for firms in your own market do not differ very much. If your opponent is noticeably leading in these indicators, it means that he has either found new market marketing, or applies a new development of production or distribution own products, or juggles these self-reporting.

The profitability of the main capital of the rival, again decomposed into components, shows where the company makes profits and suffers losses: from operating activities, from interest income, from the sale of non-current assets or branches, from second sources.

In general, the analysis of the profitability of rivals allows the company to specify weak sides and its advantages, and advantages and not strong side competing firms. Based on this information, it is possible to build a strategy for competitive own behavior and struggle in the market.

Of course, the question arises: where to get the figures and these in order to conduct a similar analysis. If the firms we are interested in were stock market players, the information would be open, and we would only have to take and apply it. But when, at a time when the company is not required to disclose the data, finding the source of the data is much more complicated.

In the West, for example, there is a standard: when concluding contracts with clients, the agent is obliged to provide data from his own financial statements for recent periods. Foreigners adhere to the same principle while working on the Ukrainian market. Perhaps there is an essence to work as strangers?

Since we are moving towards a civilized market, albeit at a slow pace.

To accurately assess the profitability of services and customers, select the costing unit, determine the composition of direct and indirect costs. More details in the article.

If your business provides several types of services, it is important to know which ones are profitable and which are not. But calculating the profitability of services is not so easy.

First, the material and salary components are incomprehensible. Secondly, if the service is provided in several stages or several structural divisions components of the costs are not obvious, then you cannot enter the category "Semi-finished product".

I will tell you step by step how we acted to determine cost of services and evaluate the profitability of services and customers, and what we got as a result.

Step 1. To determine the profitability of services, select a costing unit

On one of the projects that I led, I encountered the following situation. The enterprise provided more than ten types of services, but in the accounting system there was only one calculation object - “Complex service”. Such a unit of calculation did not allow calculating the cost of each service and determining its profitability (see Table 1).

Table 1. Credentials before selecting a costing object (detail)

Make a comprehensive list of all the services the company provides. Enter a separate costing element for each service in the accounting system (see Table 2).

table 2. Accounting data after implementing a costing unit (detail)

So that in the future you do not have to calculate the profitability in the context of services and counterparties manually, in the “Income” article, select similar items of the second order for each service.

For example, in a medical laboratory center, the service catalog contains hundreds of types of tests. In the accounting system, each type of analysis should be the object of calculation (see also product costing example ). This will allow you to calculate the cost of each service and its profitability.

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Methodology for calculating the cost and distribution of services

Stage 2. Approve the composition of direct costs

Which items will be included in direct costs depends on the specifics of the service and the company that provides them.

For example, in a project with laboratory research We have identified the following costs:

• reagents;
• expendable materials;
• salary of laboratory staff;
• taxes on the wages of laboratory personnel;
• rental of laboratory equipment;
• depreciation of laboratory equipment;
• other.

Review the balance sheet for account 20, so you make sure that you have included all the necessary items in direct costs.

Stage 3. Allocate direct costs for services in order to correctly calculate their profitability

boiler method. If a company provides one type of service or several similar ones from a technological point of view and in terms of resource costs, this method of distributing costs is suitable. To allocate direct costs using the boiler method, divide the sum of all direct costs by the total number of services your company provides.

exact method. Does the company provide several different types of services? - select the exact method. It implies a multi-level distribution of costs for services. So, for example, we divided direct costs for laboratory services into two stages (see Table 3):

• according to the specification - reagents and consumables;
• in direct proportion to the volume of services - all other articles.

Table 3. Accurate Direct Cost Allocation Method

To allocate direct costs according to the specification, compile a catalog of services and write down the rate of consumables for each of them. For example, in a beauty salon for the “Hair coloring” service, specify how much dye and oxide is spent on a certain length of hair. In the case of laboratory services, it is rather difficult to carry out rationing in the accounting system. Since for this it would be necessary to keep records of reagents in test tubes, and not in packages. Therefore, we divided the reagents in direct proportion to the services in which they were involved.

Distribute direct costs that are not related to a particular unit of output in direct proportion to the services that are produced in the corresponding unit.

Step 4. Select indirect costs

Highlight the indirect costs of general production. For example, the salary of the heads of the production complex or the lease of production space.

In laboratory services, indirect costs are as follows:

• rent of production areas;
• depreciation of general production equipment;
• the salary production management;
• taxes on salaries of production management;
• special assessment of working conditions;
• employee liability insurance;
• property insurance.

Review the balance sheet for account 25, so you can make sure that you have included all items in indirect costs.

Step 5: Allocate the indirect costs of services

Distribute indirect costs in direct proportion to the volume of services provided in the relevant unit.

There are several departments in the medical center, and in order to distribute the amount of rent that applies to each of the departments, we chose an alternative distribution base - wages. Acted as follows - divided wages each department for total amount salaries of production management and multiplied by the total amount of rent for production premises.

Stage 6. Calculate the profitability of services

Once you have determined the total cost of the service, relate it to the selling price. To accomplish this task, we have developed a special management report in the accounting system, which allowed us to evaluate the profitability of each client medical center(see Table 4).

Table 4. Report on the profitability of the counterparty

Prepared from materials

An important role in the process of forming customer expectations is played by previous shopping experience, advice from friends and colleagues, information received from active market players and competitors, as well as promises. If supplier information leads to high expectations, it is quite possible that the buyer who is seduced by advertising will be disappointed. If a company sets expectations too low, it will not be able to attract enough customers (despite the fact that the actual quality of the product will exceed the expectations of consumers who still decide to make a purchase). Today, some of the most successful companies manage to raise customer expectations while delivering quality products to match. Airline jet blue airways, launched in New York in 1999, has significantly raised consumer expectations for so-called low cost carriers. Passengers were offered completely new Airbuses with comfortable leather seats, satellite TV, free wireless internet and customer satisfaction policy. After some time, other low-cost airlines began to offer some of these innovations.
However, the desire of a customer-oriented company for a high degree of customer satisfaction does not mean that this the main objective for management. Customer satisfaction increases when a company lowers product prices or improves service levels, which other than equal conditions leads to lower profits. A company may be able to increase profitability in other ways than increasing customer satisfaction (modernization of the production process, additional investment in research and development). In addition, the company deals with a range of stakeholder groups: employees, dealers, suppliers and shareholders. A change in the direction of the resource flow in favor of buyers can cause dissatisfaction with "deprived" groups. The philosophy of the company should be to achieve, within available resources, a high level of customer satisfaction and compliance with the requirements of other interested groups.

Satisfaction score

Many companies conduct a systematic assessment of customer satisfaction and the factors that influence it, because customer satisfaction is the basis of customer retention. A satisfied customer usually stays loyal longer, buys new and higher level products from the company, speaks well of both the company and its products, pays less attention to competing brands, is less price sensitive, offers new product ideas to the company or services, and besides, it is cheaper to maintain, since operations with it are of a routine nature. Between satisfaction and customer loyalty, however, there is no direct relationship.
Let's say satisfaction is rated on a scale of 1 to 5. With a very low level of satisfaction (1), customers are likely to refuse the company's services and certainly will not recommend it to their acquaintances. At an intermediate level of satisfaction (2-4), buyers will be very satisfied with the company, but at the same time they will be more inclined to switch to more attractive competitive offers. With the highest level of satisfaction (5), the chances of a repeat purchase and good reviews about the company are high. A high degree of satisfaction or admiration for a company creates not just a rational preference, but also an emotional connection with the company or its brand. According to the company Xerox, "completely satisfied" customers are six times more likely to repurchase within the next 18 months than "very satisfied" customers.
When customers rate satisfaction with one of the elements of a company's performance (say, delivery), management must be aware that people's perceptions of a good delivery can vary greatly. Customer satisfaction can be related to the speed of delivery, its timeliness, the completeness of the order documentation, etc. In addition, it must be understood that two different buyers may report the same high satisfaction for different reasons. Some people are easy to please and they are satisfied in most cases, others are difficult to please, but at the time of the evaluation, they just succeeded.

Quality of goods and services

Maximize lifetime customer returns

Ultimately, marketing is the art of attracting and retaining profitable customers. James Patten of American Express claims that those in his company include customers who spend on purchases in retail 16 times more, restaurants 13 times more, air travel 12 times more, and hotel stays 5 times more than the average American. And yet, every company has customers whose service brings losses. The well-known Pareto rule states that 20% of customers bring 80% of the company's profits. William Sherden suggested an addition - 20/80/30. He believes that "the 20% of the most profitable customers give the company 80% of the profits, half of which is lost while serving the 30% of the least profitable customers." Conclusion: the company can increase profits by abandoning the most unprofitable buyers. Moreover, not always the most profitable buyers of the company are its largest customers, who demand maximum discounts and a high level of service. In contrast, ordinary buyers pay for goods at full cost and are satisfied with a minimum level of service; however, dealing with them is associated with high costs. "Average" customers are served on good level, buy goods at almost full price and very often the most profitable companies. That's why many firms are now looking specifically at the "middle class" of buyers. For example, leading express delivery companies postal items come to the conclusion that they cannot afford to ignore the needs of small and medium-sized shippers. Programs targeted at small clients include mailbox placement in convenient places. This allows postal companies to provide significant discounts on letters and parcels that are picked up at the shipper's office. In addition to developing its network, the company UPS, for example, conducts seminars for exporters on the topic of optimizing international transport.

Buyer profitability and competitive advantage

What is a profitable buyer? Profitable Buyer - it is an individual, household or company that generates income over a long period of time that sufficiently exceeds the company's costs of attracting and maintaining them. Please note that we are talking about income and costs over the course of life cycle buyer, and not about the profit from a particular transaction.
Many companies evaluate buyer profitability, but most fail to determine the individual profitability of their customers. For example, banks claim that customers use different banking services, which means that transactions are recorded in different ledgers. Those banks that did manage to calculate individual profitability were horrified by the number of unprofitable customers. Some banks reported that up to 45% of their individual depositors were unprofitable. Here the company has only two options: raise tariffs or cut service maintenance.
A useful example of buyer profitability analysis is shown in Figure 1. 4.2. The columns indicate the buyers, the rows indicate the goods. Each cell has a symbol indicating the profitability of selling this product to this buyer. Buyer 1 makes a very high profit; he makes purchases of three cost-effective goods ( R 1, R 2 and R 4). Buyer 2's profitability is not uniform; he buys one profitable product and one unprofitable one. Buyer 3 is not profitable because he buys one profitable and two unprofitable goods.

Rice. 4.2. Profit Analysis "Customer/Product".

What to do with buyers 2 and 3? The company has two options: 1) raise the price of unprofitable products or stop producing them, or 2) try to sell profitable products to these buyers. If loss-making buyers refuse to buy, they are of no interest to the company, which will only benefit if they go to competitors.
For buyer profitability analysis(APP) the method of accounting costing by type of activity is best suited. The company evaluates all income from the buyer and deducts costs. The latter include not only the costs of production and distribution of products and services, but also all other resources of the company spent on servicing this customer. If you follow this procedure for all customers, you can classify them by profit levels: "platinum" customers (most profitable), "gold" (profitable), "bronze" (low-profitable, but desirable), and "wooden" (non-profitable and undesirable).
The task of the company is to transfer "bronze" buyers to the category of "gold", and "gold" - to the category of "platinum". From the "wooden" buyers should either refuse, or increase their profitability. To do this, as we have already said, it is necessary to increase prices or reduce maintenance costs.
Companies must create high value not only in absolute terms, but also in comparison with competitors, and at a fairly low cost. The ability of a company to operate in one or more directions where competitors are unwilling or unable to match the level of value and cost it creates is called competitive advantage. M. Porter called on companies to create a sustainable competitive advantage. In general, if a company wants to work long and profitably, it must constantly invent new advantages. Any benefit to the company must at the same time be advantage for buyers and be accepted as such. For example, if a company delivers faster than its competitors, but speed is not critical for customers, this will not be an advantage for them.

Buyer Lifetime Return Estimation

Buying capital of the company

Development of relationships with customers

In addition to cooperation with partners - management partnerships - many companies are focused on strengthening relationships with their customers, i.e. on customer relationship management. It is the process of using detailed information about each specific customer and managing all the “touch points” with customers. The ultimate goal is to maximize customer loyalty. common ground refers to any contact of the buyer with the brand or product, whether it be personal use, contact in the media mass media or simple observation. For example, in a hotel, touchpoints might be room reservation, check-in and check-out, membership in loyalty programs, room service, business services, gym, use of laundry services, restaurants and bars. In hotels Four Seasons, for example, rely on personal contacts: service staff always addresses the guests by name, the employees are endowed with great powers and understand the needs of sophisticated businessmen-guests of the hotel; Besides, in Four Seasons there is at least one of the region's best amenities, such as the best restaurant or spa pool.
Customer relationship management enables a company to provide customers with superior customer service in real time. This is achieved through effective use information about individual clients. Companies can customize their offerings, services, programs, messages, and media based on each value-added customer. CRM is important because aggregate customer returns are one of the main components of a company's profitability. One of the first CRM methods was used by the company Harrah's Entertainment.
Some of the foundations of customer relationship marketing were laid down by D. Peppers and M. Rogers in their One-to-One book series. The authors name the following four principles of "personal marketing", they are also the four principles of CRM: