“What is our most profitable product?” “Who are our most profitable customers?” The ability to answer these questions represents a significant competitive advantage, but a surprising number of companies can only take guesses. A data warehouse designed to analyze profitability can deliver tremendous value to managers.
Whatever the value proposition of a business's product is, the business must realize enough revenues in delivering it to cover the associated costs. Successful businesses are able to quickly identify products for which this balance can be established. Steps can often be taken to tip the scales in favor of profitability for products that are in the red, but if allowed to continue, the delivery of a losing proposition will eventually result in financial ruin for a business. The sooner successful and unsuccessful products are identified, the better.
We refer to the process of studying and controlling product profitability as Integrated Product Management, because it requires an integrated view of many processes within the business. In the first part of this chapter, we will study the product management needs of a retailer, and learn how a carefully designed series of data marts can be used to serve these needs.
For some businesses, profitability analysis can be extended beyond the product to incorporate the customer. It is worth the cost of taking steps to retain a good customer, but the same effort is wasted on one who does not generate revenue. When ...