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Commercial ControlSales & Customers

Knowing which customers are really worth having

Move from turnover-led customer decisions to a clearer view of customer value, margin and cost to serve.

9 questions answered

Questions answered on this page

01How do I stop long-standing customers expecting automatic discounts?
02Are our biggest customers actually our most profitable customers?
03How do I calculate customer profitability properly?
04When should I walk away from an unprofitable customer?
05How much business are we doing that we would be better off without?
06How do I get salespeople to think about profit rather than turnover?
07How do I know whether special prices are still commercially sensible?
08How should a merchant review customer pricing?
09How often should customer terms and discounts be reviewed?

How do I stop long-standing customers expecting automatic discounts?

Automatic discounts become harder to challenge when they have turned into an informal entitlement rather than a deliberate commercial decision. Start with evidence about the account: current sales, gross profit, product mix, delivery pattern, returns, credits, payment behaviour and the support it consumes. Explain that pricing must reflect the value and cost of the relationship today, not only its history. Avoid removing every concession without discussion. Decide which terms remain justified, which need conditions and which should change over a sensible period. Give the salesperson clear authority and preparation for the conversation. A long relationship matters, but loyalty works both ways. It should not prevent a merchant from reviewing whether the business remains commercially sustainable.

Are our biggest customers actually our most profitable customers?

Not necessarily. A large account can produce impressive turnover while carrying low margin, frequent small deliveries, special sourcing, extended credit, returns, disputes and heavy management attention. Those demands may consume much of the gross profit the account appears to create. Compare customers using more than sales value. Look at gross profit in pounds and percentage, product and order mix, delivery and handling patterns, credit performance, rebates or special terms and avoidable service costs. The purpose is not to allocate every overhead perfectly. It is to identify material differences in the quality of revenue. Some large customers are highly valuable. Others create activity, risk and working-capital pressure without enough return. Size should prompt closer understanding, not automatic importance.

How do I calculate customer profitability properly?

Begin with the revenue and gross profit generated by the account, then examine the costs and working-capital demands that vary because of how that customer trades. These may include delivery frequency, small orders, special purchases, returns, credits, urgent handling, technical support, bad-debt risk and slow payment. Use information the business can obtain reliably rather than creating a complex model nobody trusts. Review the result alongside strategic value, growth potential and the strength of the relationship. Customer profitability is an informed commercial view, not a single perfect number. The useful question is whether the account produces enough sustainable value for the price, terms, service and risk it receives, and what would need to change if it does not.

When should I walk away from an unprofitable customer?

Walking away should normally follow an evidence-based review and a genuine attempt to improve the account. Confirm that the problem is persistent, material and within the customer relationship rather than caused by the merchant’s own errors. Consider whether price, product mix, delivery arrangements, order pattern, payment terms or service expectations can be reset. Be clear about the minimum commercially acceptable position and who can approve an exception. Some strategically important accounts may justify a lower short-term return, but that decision should be explicit and time-limited. If the customer will not accept reasonable changes and the relationship continues to destroy value, consume disproportionate capacity or create unacceptable credit risk, leaving may protect the wider business and the service given to better customers.

How much business are we doing that we would be better off without?

Measure the accounts, orders and activities that create turnover without enough gross profit, cash or strategic value. Look for repeated low-margin exceptions, uneconomic small deliveries, special products with weak recovery, excessive returns, poor payment and accounts that absorb management time without improving. Do not assume all low-margin business should disappear. Some lines support a wider profitable relationship, and some new accounts need time to mature. Segment the evidence by customer, product group, branch and salesperson, then challenge the largest gaps first. The objective is not to reduce sales for its own sake. It is to release stock, credit, delivery and management capacity from work that creates too little value, so the business can protect and develop stronger opportunities.

How do I get salespeople to think about profit rather than turnover?

Salespeople need measures, authority and conversations that make profit quality part of normal selling. Show gross profit value and percentage alongside turnover, then connect discounting, product mix, delivery promises, payment terms and returns to the value of the sale. Use account reviews and pipeline discussions to ask what the business earns, not only what it invoices. Avoid rewarding volume while criticising low margin afterwards. Targets and incentives should not push people towards behaviour the business does not want. Give clear pricing boundaries and practical support for customer conversations. Salespeople are more likely to protect profit when they understand the commercial trade-offs, can see reliable information and know that leaders will support a sensible decision rather than reverse it to preserve short-term volume.

How do I know whether special prices are still commercially sensible?

Review the original reason for the special price and compare it with current behaviour. Check whether the promised volume, product mix, order size, collection or delivery pattern and payment terms still occur. Recalculate the margin using current purchase costs, supplier support, rebates and handling requirements. Consider whether the price applies too broadly or continues after the project or competitive circumstance that justified it ended. Special prices can remain sensible when they secure valuable, predictable business or support a wider profitable account. They become leakage when conditions are no longer met, nobody owns the review or the exception quietly becomes permanent. Every significant special price should have a reason, an owner and a review point.

How should a merchant review customer pricing?

A useful review combines account performance with the way the customer now trades. Examine sales, gross profit, product mix, discount movement, special prices, supplier support, delivery frequency, returns, credits, payment behaviour and any significant service demands. Compare the current position with the reason the terms were agreed. Involve the salesperson because the figures need customer context, but require evidence rather than reassurance alone. Identify which prices remain appropriate, which need conditions and which require a planned customer conversation. Prioritise accounts where the commercial exposure is material. A pricing review should not become a blanket increase exercise. It should help the merchant protect fair value while preserving strong relationships and sensible local judgement.

How often should customer terms and discounts be reviewed?

Use a regular cycle, supported by event-based reviews when circumstances change. Material accounts, special prices and high-risk terms may need quarterly or six-monthly attention, while stable standard accounts may be reviewed annually. Review sooner after supplier increases, a major shift in volume or product mix, persistent overdue debt, repeated returns, a new project or the end of an agreed deal. Match the frequency to the value and risk of the account rather than using one timetable for everyone. The important point is ownership. The business should know who reviews the terms, what evidence is required and who approves continuation or change. Without that discipline, temporary concessions remain in place long after their commercial purpose has disappeared.

What you may be seeing

Large accounts receive attention and concessions because of turnover, but their gross profit and cost to serve are not understood.
Special prices remain active after projects, volume commitments or supplier support have changed.
Sales reviews celebrate revenue while delivery, returns, slow payment and management effort sit elsewhere.
Long-standing customers expect every price challenge to end with the previous discount being restored.
Branches and salespeople apply different judgements to similar accounts without a clear commercial basis.

What good looks like

A commercially controlled merchant understands that customer value is wider than turnover. Material accounts are reviewed using reliable information about gross profit, product and order mix, delivery, returns, payment and strategic potential. Special prices have a clear purpose, owner and review point. Salespeople understand the boundaries within which they can make decisions and receive support for fair customer conversations. Leaders are prepared to improve, reshape or leave business that persistently destroys value, while protecting strong relationships that create sustainable profit and cash. The result is not a rigid customer ranking. It is better evidence, clearer judgement and fewer concessions continuing by habit.

What may be happening underneath

Measures: Customer performance is judged mainly through turnover, with limited visibility of gross profit, cash and cost to serve.
Pricing ownership: Special prices and discounts have no clear owner, conditions or review date.
Sales incentives: Targets and recognition reward volume more strongly than sustainable commercial value.
Service design: Delivery frequency, order size, returns and support have grown without being reflected in the account terms.
Customer history: Length of relationship is being used as a substitute for current commercial evidence.
Information: Account, product, delivery and credit data sit in separate reports and are not brought together for decisions.

Questions worth asking

01Which customers create the greatest gross profit after considering how they order, receive goods and pay?
02Which special prices still meet the conditions that originally justified them?
03Where are we rewarding turnover while absorbing delivery, credit or handling costs elsewhere?
04What is the minimum acceptable commercial position for each material account?
05Which customer conversations are being delayed because nobody wants to challenge the history of the relationship?

Where to go next

Review customer value before chasing more turnover. BGC commercial control resources help merchant leaders examine account profitability, strengthen pricing decisions and focus sales effort on business worth keeping.

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