Monetisation · Margin structure · Component
The cost to serve model
What it actually costs to deliver to a given customer or segment, including the costs that are usually averaged away.
The deliverable
What it is
Averaged overhead conceals the customers who consume disproportionate support, customisation and management attention. Those customers frequently look like the best ones on revenue alone.
The model does not need to be exact. It needs to be good enough to rank customers correctly, which a rough activity-based allocation usually achieves.
One level in
What it is made of
Each element is a constituent part of the component. Follow one to see the attributes it carries.
The direct costs
Costs that vary directly with delivering to this customer.
3 attributes: Cost · Cost type · Varies with
LearnThe service costs
Support, onboarding, account management and customisation — the costs that hide in overhead.
3 attributes: Time spent · Whose time · Recurring or one-off
LearnThe allocation basis
How shared costs are attributed, and what that choice does to the answer.
3 attributes: Basis · Reason · Confidence
Learn
Allocate service cost by activity, not by revenue. Allocating by revenue guarantees the model tells you nothing new.
The other components in margin structure
The contribution analysis
What each customer, product or segment contributes after its own costs — the view that decides where to put effort.
LearnThe scale model
How margin behaves as volume grows — whether it improves, holds, or quietly deteriorates.
Learn