Today, 23% more shoppers visit multiple stores and websites to find the best prices for their groceries than did in 2010.George Faigen, Partner and co-author
Whether you’re selling diapers, home insurance, or internet access, within your portfolio certain categories and products will have higher profit margins than others. Some may not even be profitable at all, and are in the mix in order to draw in customer volume on other products and services.
But in the digital age, such a business model is at risk. Competitors – often newer, online competitors - are able to cherry pick the most profitable products and customers, leaving you in an accelerating downward spiral of falling earnings.
In this article, we explain how to identify where the risks to your business lie, and what tactics can be employed to help fend off these threats.
Reducing Loss-Leaders in a $1 Billion Service Provider
How a service provider reduced the proportion of unprofitable customers and increased average profitability.
As well as looking to remove price-based loss-leaders, some companies are de‑incentivizing unprofitable customers away from their business.
One service company struggling to maintain the margins of its repair and warranty business forced certain customers to pay higher prices after analyses showed that they were likely to cost more than other customers to serve over the years. While it made profits from the sales to most of its warranty customers, a few were dragging down margins by requesting more than six repairs per year.