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Summary

Customer Profit Hacking Book Summary 

In this book, we focus on gaining more insight about the concept of customer value. This book focuses in particular on the financial value of the customer and how a company can use that information and any insights gained from it to accomplish a more sustainable return on investment. In this chapter, we described our vision about value creation. This chapter began with the premise that value creation is the basis for the existence of a company. Ideally, a company will create value for all of its stakeholders including its customers, employees, shareholders/investors, suppliers and society. In order to acquire, maintain and grow profitable customers, it is important and potentially absolutely critical to have a clear understanding about both the value of the customer and the value for the customer. In the following chapters, this book will address how to improve a company’s overall results in a structured way.

Customer relationships are defined by customer expectations and the objectives of the supplier. Customer expectations can be expressed in terms of customer satisfaction, while supplier objectives can be expressed in terms of customer profitability. Together, they define the productivity of a customer relationship. We have concluded that it is unlikely that a structurally unbalanced customer relationship will develop into a long- lasting customer relationship. In a worst-case scenario, this would lead to the loss of the customer. It is important to remember that ignoring the productivity of customer relationships can lead to the inefficient use and deployment of scarce resources involving people, time, money, and goods.


Delivering customer value is not and cannot be a one-time event. Companies must continually work to learn what their customers value today, and then strive to deliver that value on an ongoing basis. Why? Because customers evaluate ‘value’ every time they make a purchase, regardless whether they purchase once a year or once a day. Complicating this, some customers value low price above any other feature of the product or service. Of course, the key is for the supplier to know which customers value what features and then to figure out how to deliver whatever it is that a particular customer values. 

It is important that readers have a thorough understanding of the factors that affect the customer relationship, both viewed from the perspective of the supplier and from the perspective of the customer.

Traditional marketing and sales literature typically pays a lot of attention to the value for the customer, including developing and describing value propositions, service concepts, customer relationship management and brand image. In collaboration with R&D and marketing, value propositions are developed and tested. Recently, interest has been growing about a more dynamic look at the customer experience supported by concepts such as customer journey analysis and customer experience management (CEM). Customer rating, meaning the value for the customer, is not seen as a static amount of the various value elements, but as a result of various moments of experience.

In this book, we focus on value of the customer. In our view, the ultimate measure of value is customer profitability, where profitability or profit is the result of the value a company is able to create for its customers.

In business to business markets, acquiring customers takes significant amounts of time, resources and money. Therefore, it is important that business activities are based on well-founded knowledge of the value of customers. Our observations suggest that a paradoxical situation exists with respect to managing customer value. The cumulative value of individual customers ultimately determines shareholder value. In turn, shareholder value is based on current and future profit of a company. Profit is the sum of the cumulative yields of customers minus the cumulative customer-related costs.

We expect or assume that a shareholder driven company knows which customers are profitable and which of its customer are not. However, many companies focus on maximizing sales meaning top-line results rather than on customer specific profitability. As a result, they don’t do enough to determine exactly the level of profitability attributable to each customer. Why not? In part, the answer is that traditional accounting measurements fail to or at least struggle with the concept of developing robust models that properly account for all costs and risks and expenses associated with sales to individual customers. As a result, information available about customer specific profitability is limited and often inaccurate. In addition, traditional accounting processes focus on cumulative results, not on individual customer financial performance. Consequently, many companies focus on specific measures to lower costs across the board and in generic ways, rather than focusing on developing robust models that measure, monitor, and report on individual customer profitability. The authors of this book believe that a company’s focus should be on measuring and managing individual customer contributions to the company’s profits.

What is the real value of the customer? The answer to that question provides a rational basis for allocating resources to the ‘right customers’ meaning customer relationships that are in the long-term both profitable and productive. The answer to this question also provides a rational basis for decisions about how much risk or liability company should be willing to accept or absorb in connection with sales to a specific customer.

In this book, we focus on value of the customer. In our view, the ultimate measure of value is customer profitability, where profitability or profit is the result of the value a company is able to create for its customers.

In business to business markets, acquiring customers takes significant amounts of time, resources and money. Therefore, it is important that business activities are based on well-founded knowledge of the value of customers. Our observations suggest that a paradoxical situation exists with respect to managing customer value. The cumulative value of individual customers ultimately determines shareholder value. In turn, shareholder value is based on current and future profit of a company. Profit is the sum of the cumulative yields of customers minus the cumulative customer-related costs.

We expect or assume that a shareholder driven company knows which customers are profitable and which of its customer are not. However, many companies focus on maximizing sales meaning top-line results rather than on customer specific profitability. As a result, they don’t do enough to determine exactly the level of profitability attributable to each customer. Why not? In part, the answer is that traditional accounting measurements fail to or at least struggle with the concept of developing robust models that properly account for all costs and risks and expenses associated with sales to individual customers. As a result, information available about customer specific profitability is limited and often inaccurate. In addition, traditional accounting processes focus on cumulative results, not on individual customer financial performance. Consequently, many companies focus on specific measures to lower costs across the board and in generic ways, rather than focusing on developing robust models that measure, monitor, and report on individual customer profitability. The authors of this book believe that a company’s focus should be on measuring and managing individual customer contributions to the company’s profits.

What is the real value of the customer? The answer to that question provides a rational basis for allocating resources to the ‘right customers’ meaning customer relationships that are in the long-term both profitable and productive. The answer to this question also provides a rational basis for decisions about how much risk or liability company should be willing to accept or absorb in connection with sales to a specific customer.


Not surprisingly, salespeople tend to focus on the revenue that an existing or a potential customer can generate. In reality, customers have a ‘dark’ side, i.e. customers are a source of costs and financial risks. The goal for every organization is to find the optimal relationship between risk and reward. In order to reconcile these two perspectives, we have developed and have presented the concept of the Customer Value Worksheet. It is a way to visualize both the assets (revenues) and the liabilities (costs and financial risks) related to doing business with individual customers.

Revenues from customers are the result of the value a company offers its customers. The value a company offers involves investments made before any income is generated, in addition to the costs in connection with the sale itself (the expenses identified using the matching principle i.e.: using U.S. Generally Accepted Accounting Principles, also known as GAAP). In that sense, revenues follow costs. In order to have an accurate estimate of the profitability of an individual customer, the company must have accurate data on direct and indirect revenues and costs that can be allocated to a specific customer. Only in this way we will get a clear picture of the contribution of each customer to the financial results of a company. 

The moment a company understands the net contribution of each customer to profitability, they can begin to make better decisions about the time and resources to be spent on individual customers or customer segments. 

Measuring customer profitability by taking into account revenue and costs is insufficient. Companies must also take into account the financial risks of doing business which include:

The credit risk: the risk a customer cannot pay.

The payment risk: the risk a customer does not want to pay.

Both of these risks can have a substantial impact on the near and future profitability and sustainability of a customer relationship. High financial risk not only creates immediate costs, but may also influence future earnings, costs and profit. This is particularly true if and when a debtor/customer files for bankruptcy protection. Therefore, it is of the highest importance that credit risk and payment risk are assessed, monitored and managed in such a way that the seller can maintain positive cash flow and so that its continuity can be assured.

Companies are better off when they focus their activities and resources on the acquisition, maintenance and development of productive and profitable customer relations. Customer profitability is the sum of direct and indirect earnings minus the customer related direct and indirect costs, along with an allocation of the costs related to financial risks.

By introducing the concepts associated with implementation of CBA 2.0 and as a consequence requiring the finance/accounting and sales departments to cooperate. This cooperation will result in a better insight in ‘real’ customer value, which will provide the basis for better decisions about investments in marketing, sales, customer service and after-sales service. The implications for an organization will be discussed in the following chapter.


The main reasons why effective collaboration between departments is often so difficult is poor and unclear communication resulting in departments working at cross purposes. Other factors include:

  • Poor communication resulting in departments working against each other;
  • A lack of trust;
  • A loss of trust;
  • Past conflicts between departments;
  • Lack of alignment between those departments;
  • Lack of vision of management (hence a lack of focus of the employees); Goals that are not shared;
  • Cultural mismatches (people who do not fit within the company’s culture or a team resulting in internal conflicts or in conflicts with customers); Poor guidance from senior management;
  • Poor leadership by senior management;
  • Failure on the part of the management team to adequately describe the benefits of collaboration;
  • Failure to create consequences of individuals or departments that refuse to or are unable and unwilling to collaborate meaningfully with others.

These organizational shortcomings should not be considered a valid reason for not adopting an integrated approach. On the contrary, as soon as company values and objectives have been clearly defined and the organizational framework has been established, then a culture of cross-functional collaboration will begin to reinforce itself. The transformation toward an integrated and collaborative business model will ultimately have a positive impact on performance and on financial results. Generally, such a culture will also have a positive impact on the way employees communicate with customers.

At the end of the day, what matters is how people, processes and systems are aligned such that all stakeholders optimally benefit. Before such an alignment can occur, each department needs to understand the timelines, goals and priorities of the departments. Once these variables have been shared and understood, department heads need to look at areas that overlap, identify processes that make the departments interdependent, analyze the current status of the departments’ interactions and begin the process of integrating and aligning the departments more closely in a way that ultimately and optimally benefits the organization and its customers. When this happens in combination with incentive programs, employees become more willing to collaborate and to invest the time needed to collaborate rather than viewing collaborative efforts as a waste of their time. 


In this chapter, we took a closer look at what the cross-functional collaboration between finance and sales means in practice. We also examined the relationship between finance and (a) marketing, (b) sales and (c) customer service.

Finally, we examined the role of credit management in more detail in contributing to creating higher customer value. We believe that the credit management department can proactively support sales by determining credit risk and improving the payment behavior of individual customers. Marketing, sales and customer service can support credit management by providing relevant information about the customer, so credit management can make better informed decisions and take into account the interests of other internal stakeholders. This collaboration helps to ensure that costs decrease, cash flow improves, efficiency and job satisfaction increase. Ultimately, this results in an increase of both value of the customer and the value for the customer.


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