If you’re a manufacturing company you think about reducing costs to improve profits. If you’re a distributor you focus on customer profitability. And, if you are a service organization you may target customer lifetime value.
But, there is another level to enhancing profits when you get more of your organization participating. It starts with visibility. Here are three groups in your company that can impact profits when they have visibility to key performance indicators within their scope of work.
Start with your sales team. First, provide analytics that show customer profitability. Focus on negative and low margin accounts. While your largest accounts are likely to yield lower margins, the smaller accounts should have hefty margins. We see many companies that under-manage small accounts which creates a big leak in profits. Margin lift of 2-3 points is common.
And, if your sales team has the authority to adjust prices, then, provide metrics on price performance. Identify the team members that are selling largely on price. They are easy to identify as they have the highest volume and the lowest margins. Invoice data can be easily analyzed and presented for discussion and remediation.
Product managers and marketing managers can help, too. Equip them with analyses that show margins by market, customer group, region, etc. Insights into changes in price, cost, mix and volume tell the story on margin performance and enable managers to adjust marketing programs and promotions on the fly.
Analysts provide great insights. We have several clients who use analysts to help identify profit opportunities. Equipped with cloud-based analytic tools, analysts can find margin leaks in many places in the business. For example, a review of freight costs versus freight revenue at the transaction level reveals discounting exceptions from freight policies. Or, declining sales among specific accounts indicate sales churn issues that can be addressed before the customer is lost completely.
Profit enhancement starts with visibility into the data that reveals margin leaks. Analytical tools that are designed specifically for margin analysis make it easy for anyone in the organization to contribute to profit enhancement.