Global financial crisis. The rules have changed. Time to get SAS^®

WHAT YOU NEED TO KNOW

Twenty percent of customers typically destroy 400 percent of profit. Why?

Traditional accounting systems are great at reporting overall health but don't help managers understand how actions affect profit at any level of granularity. In a joint 2008 survey by BusinessWeek and SAS, less than half of executives believed they understood what drove profit. Pick up a book from any of the thought leaders on cost and profitability. You will come across a whale curve or profit cliff.

When you stack up customers in terms of how they contribute to profit, as Peter Turney shares in his book Common Cents, you typically find:

• 30 percent deliver 500 percent of profit.
• 50 percent add no value.
• 20 percent destroy 400 percent.

If you made $5 billion profit last year, that means you could have potentially destroyed $20 billion. Use 30 percent as a more conservative estimate and you are still looking at a potential $1.5 billion of destruction.

Bad debts are not the only source of destruction. Every action we take has an impact on profit; it's rarely "fixed." There are combinations of product, customer and channel that far outstrip "standard costs"—even with what look like "hefty fees."

One of the greatest culprits? The allocation of shared costs such as IT and Head Office functions. It's typically done "top down" not "bottom up." This results in a false picture of true product, customer and channel profitability.

THE SOLUTION

SAS customers are using our software to gain a firm handle on liquidity and costs. For instance, one company is using our software to value the cost of maintaining debt—gaining a clearer picture of which debt should be transferred and how to price it.

At a time when mergers and acquisitions are even more prevalent, a company is using SAS to value and identify cost savings when integrating acquisitions. Another customer used SAS to identify a major segment of business that was unprofitable—a segment previously considered one of their best.

RESOURCES

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WHAT YOU NEED TO KNOW

Reputation affects market capitalization and, more importantly, survival. Accountants classify reputation as an intangible asset: the goodwill associated with your brand and employees. Intangible assets account for 85 to 90 percent of a company’s market value, according to figures cited in FastCompany.

When confidence in your ability to act falters, reputation and book value can drop overnight. All this is exacerbated by the speed of communication, as we have seen in the current market turmoil. When that happens, one possibility is that access to capital gets harder and more expensive, leading to layoffs and fire sales.

In a joint 2008 survey by BusinessWeek and SAS, a mere 20 percent of CEOs and CFOs were happy with their organization’s agility. Preserving reputation is a factor of your ability to respond to opportunities and threats with facts and insights that prove you have a sound, strategic plan.

The SAS operational risk database reveals that losses declared across all industries as a consequence of an unexpected event are $86 million, up $3 million since 2006. Many others go unreported. It may not be a question of if but when you face such an event. Given that reality, how resilient is your organization to such a figure? And how would such a lost affect your cash flow and reputation?

THE SOLUTION

To mitigate reputational risk and improve their ability to seize opportunities, SAS customers rely on our software in several key areas.

Strategy management helps align the organization around a common set of goals, principles and standards for improved governance and speed. The transparency and predictive capabilities of SAS provide auditable facts and predictions that support the actions and figures shared with stakeholders and regulators. SAS solutions for managing human and IT capital help companies grow and develop these assets for competitive differentiation.

RESOURCES

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WHAT YOU NEED TO KNOW

Recessionary fears will leave consumers and businesses feeling poorer and exposed. They will be more frugal and cautious with expenditures. But it is still possible to capture attention. For marketers this means a greater need for insight: an understanding of customer profitability, potential, needs and attitudes—particularly as marketers adapt to a new economy.

With insight, the focus switches to interaction – which channels, touch points and messages deliver the highest return. Analytics helps you optimize and improve both channel effectiveness and customer experience to build profitable relationships.

Analytics, applied with the precision of a laser, affects two things: increased ROI and the ability to demonstrate value to those who hold marketing accountable. This could be the opportunity you have been waiting for. Seize it!

THE SOLUTION

One SAS customer is using our software to not only identify its most profitable customers, but those with high potential and lifetime value. Another relies on SAS to predict future behavior within customer portfolios, to ensure cross-selling doesn’t erode overall customer profitability.

Yet another used SAS to optimize the consistency of personalized touch points across multiple contact channels, products and lifecycle stages.

RESOURCES

Read a customer success story

Read a white paper

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