by Dave Walker, SAP

Today more companies seek visibility into real indirect costs and net profit at customer and product levels, enabling them to improve their bottom line via analytics. Most companies know revenue, discount, COGs, and some direct costs at customer and product levels; but to complete the net profit picture, they need realistic indirect costs, such as overhead and service, at this level, too. These include the costs of acquiring, supplying, and supporting customers (cost-to-serve).

SAP Net Margin Analysis is a game changer and huge competitive advantage over companies that don’t invest in the intelligence, enabling you to:

  • Improve bottom-line profitability  and reduce cost
  • Provide net-margin and indirect-cost (including cost to serve) visibility across customers, products (services), channels, sales territories, and activity cost analyses
  • Put analysis in the hands of company decision makers for timely discovery and diagnosis
  • Drive informed negotiations with customers showing highest and lowest potential for profit
  • Identify more strategic and tactical initiatives to improve net margin
  • Transform or cease trading with profit-destroying customers and products
  • Identify the most profitable customer segments/customers to focus on and the most effective ways of serving them
  • Utilize truly informed key account negotiation
  • Improve  the product / channel / customer mix

 

With SAP Net Margin Analysis, you can answer the question  – ”which of my customers are profit destroyers, and which contribute most to net profit?”

The Whalebone Curve (or Cliff Curve) below illustrates a company’s profit through customer contribution to cumulative profitability. On the left are the profit creators,in the center break evens, and on the right profit destroyers. The lost profit is caused through the profit destroyers

By transforming the relationship with profit destroying customers and improving internal processes, companies can indeed improve their bottom line by showing decision makers where:

  • Interactions with particular customers are effective and efficient
  • Where improvements can be made through informed customer account negotiation 

 

 

With role-based dashboards and best-practice analysis, executive and management decision makers in sales, marketing, product management, operations, and finance can unleash the indirect cost-allocation value of SAP Profitability and Cost Management (or an alternative) combined with enriching transactional data: delivering true net margin visibility and guidance to the business users.

Learn more about  SAP Net MarginAnalysis.

 

Dave Walker is part of the analytic applications team LOB customer at SAP. He’s passionate about providing analytical applications that deliver tangible business benefit. His experience spans marketing, product development, and solution management with various companies. You can reach him at da.walker@sap.com.