By Daniel Hong and Gregory Callahan
In the quest for profitability, many business-to-business companies overlook one critical factor: the cost of customer support. Consider the media sales firm in the accompanying chart that linked its sales and postsales databases, allowing it to view accounts by price achieved and intensity of support required. It discovered that its two largest customers by revenue were unprofitable, while customers 10 through 20 were among the most profitable. The company responded by raising prices for low-price/low-support accounts and negotiated to make high-price/high-support relationships more efficient. It also gave its best existing accounts preferential treatment and cut loose many small, unprofitable accounts. As a result, the company expanded overall profits by 10%.
Daniel Hong is a partner and Gregory Callahan is a principal with Bain & Company’s Customer Strategy & Marketing practice. They are based, respectively, in New York and Boston.