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1 Customer Profitability To Create Value Session1

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1 Customer Profitability To Create Value Session1
Understanding Customer
Profitability To Create Value
Bala V. Balachandran
J.L. Kellogg Distinguished Professor of
Accounting and Information Systems

The Current Business Environment
New Products

Manufacturing Excellence

Demanding Customers
Changing Workforce

Changing Technology
New Competitors

Decreasing Margins

Global Competition

© 2005 Bala V. Balachandran
Kellogg School of Management

Levers to Maximize Profit

© 2005 Bala V. Balachandran
Kellogg School of Management

Levers to Maximize Profit

© 2005 Bala V. Balachandran
Kellogg School of Management

Bala’s 4Ms
Measure Both Revenues & Costs Correctly (ABC)
Monitor Movement of Both Revenues & Costs
To Apply 50% Rule
For Benchmarking
Rule-I and Cashew nut Rule-II
& continuous Improvement
Manage For Action Plan
Yield Management / Revenue Management
Thru-put Management
Activity-Based Management
Process Value Analysis So That We Can:
Maximize Profitability
© 2005 Bala V. Balachandran
Kellogg School of Management

Strategic Process Management

© 2005 Bala V. Balachandran
Kellogg School of Management

Strategic Process Management

© 2005 Bala V. Balachandran
Kellogg School of Management

Strategic Process Management
Product Innovation/Excellence
•Nike
•Merck
•Sony

Latest Products

Activity Based
Management

Operational Excellence
•FedEx
•Wal-Mart
•Costco

Operational Excellence

Customer
Intimacy

Personal Touch and Feel

© 2005 Bala V. Balachandran
Kellogg School of Management

Strategic Profitability Management

“Constancy of Purpose”

© 2005 Bala V. Balachandran
Kellogg School of Management

Revenue Management
“Revenue management” is the art and science of predicting real-time consumer demand at the micromarket level and optimizing the price and availability of products." R. G. Cross
Keenly Observe Buying Behavior of Customers
Objective of RM is to Sell
The Right Product to the Right Customer at the Right
Time for the Right Price

© 2005 Bala V. Balachandran
Kellogg School of Management

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