Mastering Business Analytics: The real MBA for career success, Step-by-Step
Some common myths and misconceptions:
1. (Sales = Profitability) “Businesses are in business to make sales.” They are not; businesses are in business to make a Profit. Profit stems only from effectively profitable sales. Read any of about a million unfocused ads to begin to appreciate the insanity that falling into this (typically, loyalty-based) trap presents.
Who are OUR profitable customers? On what accounting bases are they profitable?
Technical aside: Do we and, if so, how do we parse our nearly-profitable customers? If we can sufficiently push volumes from customers who cover variable costs, we might be able to reduce unit fixed charges to the point that these "marginally profitable" customers begin to produce significant real profits in the aggregate.
How do we address our targetable profitable segments? Our non-targetable profitable segments?
2. (Loyalty = Profits) “Loyal customers are the best customers” (because they are profitable). They are not only not necessarily profitable, they are often extremely expensive to maintain both directly and indirectly. See: Loyalty (Beauties vs. Barnacles; Butterflies vs. Bilge)
3. (Shop-floor Benchmark = Corporate Metric) “Benchmark metric selection is irrelevant as long as it aligns with the corporate metric.” (Metric ROA operationalized as “turns”; UTC / Hamilton-Sundstrand).
4. (Selling Strategy = Marketing Strategy) “Selling strategy is subsumed within marketing strategy, by definition.” Do OUR sales and marketing departments harmoniously coexist? Synergistically?) OUR primary financial and marketing strategies MUST be an implementation of our primary corporate tactic. Are they? In truth, they seldom are.