In the battle for volume and margins: A case study of customer profitability within the sporting goods industry

Sammanfattning: This is a case study of a company in the sporting goods industry. The aim of this thesis is to examine how customer profitability differs between large volume customers. An Activity Based Costing (ABC) approach is used to allocate resources and to measure each customer’s profitability defined as net margin minus the cost to serve. Our findings show that despite similar large-volume characteristics, two out of the three customers incur much higher relationship costs leading to lower customer profitability. The “middle-sized” customer turns out to be least profitable due to a combination of high discounts as well as a high cost to serve. Behind the varying discounts and cost to serve lie differences in business models and degree of centralization affecting both sales procedures and types of services available. To conclude none of the customers were unprofitable.