Bailey agrees: "Back in my rugby-playing days I remember coming off the pitch cock-a-hoop after scoring three tries. The coach ripped me apart. He said I should have scored five. The point is that, unless you have measurements in place, you simply cannot monitor your performance. So what if an account is making you a 6% profit? Perhaps it should be making you 12%!"

At a deeper level, unless you have the right numbers, how can you be sure you have the right strategy?  Bailey says: "Companies make investments in factories and product development.  But it is the front-end that determines whether these planned profits are actually made. Therefore, suppliers need to be investing in the customers, who in our case are the big retailers.  You cannot begin to do that unless you understand the profitability of different accounts."

All this information can be used in many ways.

At a basic level you can use it to spot unprofitable accounts (see graph 1), says Dent.  Often this shows that a whole raft of small accounts is not making money.  Equally, says Dent, it can throw up unpalatable facts about your largest accounts.  "Many suppliers give huge concessions to big resellers or retailers without analysing the real costs."

Or you can start to compare the cost-to-serve of different accounts (see graph 2).  This example shows that large computer resellers cost a lot to serve because they demand big- deal discounts. 
You can also map the cost-to-serve against profitability (see graph 3).

It is also vital to look at cost-to-serve when selecting new intermediaries.  An enterprise software vendor who was used to selling direct was able to break cost-to-serve down into 340 separate actions. It was then able to swiftly identify which actions it had to do internally and which could be delegated, to whom and at what cost.

But perhaps the real value of these numbers is in empowering the account manager. Finally, he or she can understand the financial dynamics of his or her customer. Perhaps the gross margin is fine, but inventory levels and receivables need to be pushed down. Or perhaps it costs a fortune to service it.  It is only by carrying out such an exercise that the account manager is able to begin a constructive dialogue with the customer.

Electrolux has taken this forward to the stage at which account managers are equipped with various spreadsheets showing the dynamics (see graph 4). Says Bailey: "When the account asks for a further 2% discount we can look at what alternative steps we can take with the retailer to maintain our profitability."  Electrolux also stresses the importance of focusing on what Bailey terms "the win/win".  "You need to find areas, such as driving down inventory or changing returns policies, where there is a gain that both parties can share."

The data also throw up new opportunities. Electrolux combines profitability by product group and market-share movement to analyse market and account attractiveness. Bailey says: "Perhaps we have gained significant market share in cookers in a particular account, but that business is currently done at a loss. What steps can we take to improve it?  Market share is only of value if it is profitable market share."