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Rest of the Story – Part 1 : ICMS – Success is NOT Logical
Rest of the Story – Part 1
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9 August 2013 - 23:21, by , in Customer Profitability Analysis, No comments

Are you red, yellow or green?

If you do business with First Union Bank in Charlotte, North Carolina, the customer service department knows you by name, account number and by color … redyellow or green.  When it comes to answering yes or no to a customer’s request for a lower credit card interest rate or to escape the bank’s $28 bounced-check fee, the First Union customer service rep’s answer will be determined by the color of a tiny square that pops up next to your name on the rep’s computer screen.

For customers with red squares the answer will likely be “No”.  Their accounts are not profitable for the bank.  Green means the customers generate hefty profits for First Union and should be granted waivers.  Yellow is for in-between customers.  The rep may negotiate with you.

First Union’s computer system is called Einstein. It takes just 15 seconds to pull up the customer profitability analysis. “ Everyone isn’t all the same anymore,” says Steven G. Boehm, general manager of First Union’s customer information center in a Wall Street Journal cover story January 7, 1999.  First Union estimates that the Einstein customer profitability analysis system added $100 million annual revenue from extra fees paid by unprofitable customers plus income generated from holding on to preferred customers who might have otherwise left the bank if not for the extra “yes’s”.

What secret formula is the basis for this powerful

Einstein system you may ask?  

What kind of cost system could report with any degree of accuracy the profitability of a specific customer? What cost system could be so simple that non-financial employees in a bank could use it? What cost accounting method could actually help add revenue and profits to the top line and bottom line of the P&L?

The Wall Street Journal does not mention the name of the method that First Union used to achieve their tremendous achievement.  But as soon as I read the story I knew the answer.  A phone call to First Union confirmed my guess.  It is called Activity Based Costing (ABC).  Yes, it’s the same ABC method that ICMS makes available today to every manufacturing, distribution, governmental and service organization worldwide. First Union Corporation not only implemented ABC, they use it and sustain it.

As Paul Harvey says “And now you know the rest of the story.”


Does your organization need to improve decision making like First Union Corp?  Do you need to know where you are making money and losing money?  ICMS has the books, training and software tool kits to help you do ABC profitability analysis and ABM cost improvement.  Call us today at 1-817-475-2945.  Or send an e-mail to Tom Pryor at tompryor@icms.net.

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Tom Pryor
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