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Friday, July 07, 2006 9:59:21 AM

Re: lmorovan post# 80443

Post# of 122759
In a former (bricks and mortar) business of mine we did an annual analysis of all customers and ranked them in terms of net return. It took into account gross profit margin, number of returns, frequency of returns, percentage of returns versus sales, number of calls to customer service, payment practices, and other metrics that reflected the cost versus profitability of the customer. The list was ordered from best customers (highest percentage return) to worst customers (greatest negative percentage return.)

Once the analysis was complete we closed the bottom 5% of customer accounts, sent a letter advising them of such, and thanked them for taking their future business to our competitors. We would often reinstate a customer once they acknowledged the issues and agreed to modify their purchasing habits. However; if they appeared in the bottom 5% again, that was the end of that.

Firing our worst customers (irrespective of their size) worked like a charm. Our overall returns improved and our better customers received the benefit of the additional resources previously expended on the problem customers.

The same concept works for most businesses that utilize it, including this one.

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