Or do they cost you money?

Hey all,

I am a business student, so I've been reading FORTUNE magazine (my Bible) the other day and one of the articles shocked me. I think it is crucial if I share the tip of how to make your company more profitable since I think this business practice is applicable to Web Hosting industry.

http://www.fortune.com/fortune/artic...368649,00.html (no free access anymore)

Now, FORTUNE magazine says: "Believe it or not, it's entirely typical to find that just the best 20% of a company's customers generate a huge portion of its share price--in some cases, all of it. The trouble is, the worst 20% may destroy a ton of value, with the middle 60% making up the difference."

Which basically means on average only 20% of clients generate the most profits for your company. And 20% are costing you money.

What FORTUNE proposes to do (and its been proven by a few huge corporations that are in their greatest shape and been in that shape since the last market crash) is to do something called "Customer Portfolio Management" - determine what clients are costing you more that you get from them and either make some marketing changes or get rid of them. No matter how crazy it sounds, it will bring you MORE money as they say.

I suggest you really look through this article before answering as it shows HOW to find out if you have unprofitable clients, HOW to manage your customers and HOW to establish more cost-effective means of communication with them so that ALL your customers will bring in profit, instead of loss.

So, my question to Web Hosting companies:
Do you manage your customers right, so that all of them are profitable? And how many customers (in % approximately) are very profitable / unprofitable to your company?

Hope to hear some good serious feedback in this regard.

PS: Don't forget a very brief summary of "5 ways to fail":
http://www.fortune.com/fortune/artic...367640,00.html (no free access anymore)

Best,

Nice little teaser....

Since I am not a subscriber to fortune 500 I can't view more than the first page...lol

Do you the marketing for them? Working on getting new sign ups? LOL

No, I do not work for them. I wish I was though.

At the time of thread publication, the access for all AOL Time Warner web sites were free of registration. Now they made people pay. Too bad.

I just love ideas and writing of FORTUNE. I've learnt plenty of winning strategies and management moves. Even though I do not represent them in any way, I highly recommend you to subscribe for them. It has become my Bible.

Apart from domain registrations (where the profit margins are terrible), we make a decent level of profit from each shared client and little bit more from our dedicated and colo fields

I've allways worked from the logic that if you dont generate a profit from it - dont do it which is why it allways amazes me when companies run their services at a loss to try and drive out the competition.

What Fortune doesn't take into account are the intangibles. For instance, and this isn't hosting related, at my restaurant I have a few customers that we don't make money from and we may actually lose money on them.
These customers over time have sent us more business by word of mouth than we could ever track.
Would Fortune suggest I keep "losing" money on this client or cut them off?

Blue, I think Fortune did not take every such element into consideration, but what it said about just "buyers" is that if a person is not profitable to your company, either cut him/her off or manage them separately in the least cost efficient way possible to try to make profit of each customer and keep your stock healthy.

Best,