Even in today’s crisis, managers can create surprisingly large profit gains by growing their profit core — selectively increasing the profitability of their current book of business. This has enormous leverage.
In most companies, 10%-15% of the customers generate 150%-200% of the reported profits, while 15%-20% of the customers erode 50% or more of these profits. The remaining 65%-75% of the customers produce only minimal profits or losses. We call the high-profit customers “profit peaks,” the large low-profit customers “profit drains,” and the small minimal-profit customers “profit deserts.”