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The Cost of Bad Customers

[CFO Magazine 1/1/2009]

In times like these, we need every customer we can get, right? Actually, at most companies, nearly one in three customers aren’t profitable. The bottom 20% — the discount shoppers and hard bargainers — can drain profits by 80% or more, says Larry Selden, a Columbia University professor emeritus. Segmenting the customer base is time-consuming and expensive, but the expense is more than worthwhile.