Subject: Customer Focus Online - September 14, 2002 Dear Reader, Here's another edition of Customer Focus Online.   If you are a first time reader, a big Texas sized "WELCOME!" We are so glad to have you with us! This e-newsletter is designed to bring you ideas on how to increase profitability and create sustained growth by becoming more customer focused. As always, we'd love to hear suggestions, feedback, and comments from the "front lines" - that means from you, our reader! So, please do let us know what is working, as well as what isn't. If you like what you see, feel free to forward this to a colleague! CUSTOMER FOCUS TIP:   Customer Profitability Have you ever tried to figure out the profitability of your customers? This month try to figure out which of your existing customers are most profitable. What? You already know? Great! That means you are already ahead of the curve! Most firms routinely measure and track profitability by product line, or geographic region. This information may be useful for various purposes - but if you have customers that buy a "mixed basket" of products or services - or perhaps even use various different channels or from various "regions" the way you define them - you could be missing out on valuable intelligence if you don't look at your data from a customer-centric perspective. Too difficult, too much trouble to measure customer profitability, you say? Then, contact us with the specifics of your situation.   We have some simple tricks that we can share with you to work with your scenarios. We have found that in many cases customer revenues and profits follow the famous Pareto principle. As a rule-of-thumb, only 20% of your customers are usually responsible for 80% of your revenues. Profits are split the same way as well - although it is quite common to find that the top 20% of your most profitable customers generate more than 100% of your total profits!   Sound impossible? Think again. This happens because there are usually several customers at the bottom of your "profit pyramid" that cost too much to serve and are usually loss generators!     Have a story to share? WHAT WE'VE BEEN READING LATELY... Customer focused strategies receiving more funding According to a recent A.T. Kearney research report, companies are increasingly focusing on the customer, and building capabilities for improved customer intelligence. The research primarly addresses larger companies where Customer Relationship Management (CRM) initiatives are under way. "As such, increasing customer loyalty and customer profitability are the top factors that continue to drive [such] companies' CRM strategies into the future." However, at The Menon Group, we have always maintained that analyzing customer profitability and becoming more customer focused are not only clever and important strategies for small and medium sized businesses, but also essential for increasing customer satisfaction, loyalty, and retention. Full story Pricing and Fairness: Do Your Customers Assume You Are Gouging Them? In trying to assess consumer attitudes towards pricing, Wharton marketing professor Lisa Bolton and two other researchers conducted experiments designed to measure whether shoppers feel they get a fair shake from the businesses they regularly patronize. The answer, it turns out, is no. Consumers in fact routinely assume that companies gouge them and reap large profits. The results of this research are summarized in a new paper entitled, "Consumer Perceptions of Price (Un) Fairness." Full story ABOUT THE MENON GROUP The Menon Group, Inc. is a world-class customer strategy consulting firm headquartered in the Dallas metroplex area, with offices worldwide. Our mission is to help you increase profitability and achieve successful growth by analyzing and unleashing the potential value in your customer data. We build and implement analytical tools and models to measure and track customer value, customer loyalty, customer retention, and customer equity, to name a few. Such tools provide the basis for developing and/or strengthening your company's customer vision and for executing "Customer Focused Strategies"SM which incorporate your customers' perspectives, and help you build deeper, more valuable customer relationships. For more information from The Menon Group, or to read or download our latest white papers and articles, please visit our website at www.themenongroup.com. Once again, we always look forward to hearing back from you with comments, questions, or suggestions! Sincerely, Raj Menon, Ph.D. Managing Partner The Menon Group, Inc. email: editor@themenongroup.com voice: 972.758.7500 web: http://www.themenongroup.com © 2002 The Menon Group. All Rights Reserved.