BU247 Lecture Notes - Lecture 6: Gross Margin, Net Promoter, Earnings Before Interest And Taxes
Document Summary
Gross margin = sales cost of goods sold. You may have strong gross margin, however, depending on the activity expenses with that customer they may not be profitable. As a business, the most profitable customers you can have are the following: Normal good or service company: (1) purchase a lot, (2) pay in cash, (3) pay on time credit card. Company: (1) purchase a lot, (2) pay late, (3) miss their payments increase customer profitability: (1) improve the processes used to produce, sell, deliver and service the customer. Process improvements (2) deploy menu-based pricing to allow the customer to select the features and services he or she wishes to receive and pay for. Activity-based pricing which establishes a base price for producing and delivering a standard quantity for each standard product (3) enhance the customer relationship to improve margins and lower the cost to serve that customer.
