ABSTRACT
Customer profitability is a black hole in most managers' understanding of their business. Identifying customer revenue is easy: it's shown in the sales ledger. A clear understanding of customer profitability allows a business to differentiate the level of service it provides to various customer segments according to their needs and their value to the company. Activity Based Management (ABM) enables managers to understand product and customer profitability, the cost of business processes, and how to improve them. Building an ABM model of a business requires a structured approach and the dedication of a team to achieve a result in a reasonable timescale. Embedding ABM into the business means giving managers not only a new understanding of what drives costs, but the means to measure and act on the drivers to reverse adverse trends. As the true costs of processes emerge, managers can sense which costs are suspiciously high.
