CEO’s are challenging managers to rethink their business fundamentals. 

The first place companies look for the answer in products, cost and operations. This is what managers have been trained to do for years.  Yet, a fundamental premise of business applies:  “You cannot cut your way to success”.

The bottom line is that businesses still have a serious disconnect between customers and profitability. 

I think that the problem is how managers analyze customers and their relationship to the business.  Customers are usually evaluated as a whole.  This misses the fundamental fact that some customers are profitable, and some are not.  Some customers create significant value for a business and others create no value and in fact, destroy value. The key is to find a way to offer the right value proposition to the right customers. 

While most senior managers understand this on an intellectual level, have no idea how to implement it and how to create and drive customer value and create and market a customer value proposition.  Most businesses instinctively believe that they have very few unprofitable customers.  The truth is that most companies are spending much to most of their marketing dollars generating customers that actually lower the value of the business.  In one financial institution 82% of the customers were actually draining value from the business. 

Next week we will explore what you can do to help your company and how to identify starting point, how to create immediate benefit to your business and the resources required for success.

I welcome your comments!