Smarter Pricing: How to capture more value in your market

When ‘strategic’ really means loss-making

Understanding customer profitability at ‘pocket price’ level will identify some accounts that cost more to serve than the contribution they provide. Typically they are large accounts that have forcefully negotiated low prices and high allowances. They demand extra support, require immediate delivery and tailored product variations. Payment terms are stretched to their benefit. We label these accounts ‘strategic customers’. We claim that they bring status to us, that they give value as reference accounts, that they influence other buyers. Professor Robert J. Dolan (1995) calls them ‘the dangerous strategic accounts’ in his Harvard Business Review article. In fact, ‘strategic’ is a euphemism for loss-making. ...