In an article in Strategic Finance, Garry Cokins states that many companies’ managerial accounting systems are not able to report customer profitability information to support analysis for how to rationalize which types of customers to retain, grow or win back, and which types of new customers to acquire. Some customers purchase a mix of mainly low-profit margin products and, after adding the non-product-related costs to serve for those customers to the product costs, they may be unprofitable. Conversely, customers who purchase a mix of relatively high-profit-margin products may demand so much in extra services that they may be unprofitable. The danger of maintaining unprofitable customers is further exacerbated by basing compensation incentives to the sales force that are based exclusively on sales revenues rather than profitable sales after taking into account the associated costs to serve the customers. Cokins distinguishes between low-maintenance ‘good’ customers who place standard orders with no fuss, and high-maintenance ‘bad’ customers who demand non-standard offers and services, such as special delivery requirements. The extra expenses for high-maintenance customers add up. Cokins advocates the use of activity-based customer profitability analysis  to turn loss-making customers into profit-making customers.
Questions:
1 Can you think of any reason why two customers who purchase equal volumes of equivalent products might be more or less profitable?
2 What actions should a company take with its unprofitable customers?