Decision Making: Customer Management

Customer Profitability

OVERVIEW

THE USES OF COST INFORMATION

HOW INDIRECT COSTS ARE GENERATED

AN 8 STAGE APPROACH TO CUSTOMER COSTING

1. Identify all income and costs for the organisation
2. Identify the customer groups
3. Identify all income sources and cost headings directly identified with the customer group
4. Identify the major indirect costs and consider appropriate cost drivers
5. Establish those costs which are not customer related.  reduce them or safeguard them as an investment in the future.
6. Calculate the "true" contribution from each group.
7. Review the results and consider if any areas warrant further investigation.
8. Take appropriate action.