In reading Ronald Huefner's book, I could not help but be reminded of my own experiences in teaching cost accounting and management. Teaching materials and plans in this area inevitably revolve heavily around concepts and techniques for allocating costs and measuring the profitability of products, services, and customers, leaving comparatively little time for the “so what?” questions. Once the measurement is done, how should we use the information to improve profitability?
Without a systematic framework, this part of the discussion can quickly become a generic exercise in developing a “laundry list” of broad approaches—such as discount pricing for large and predictable orders, preferential pricing for “strategic” customers, and even the wholesale “firing” of customers—with little in the way of prescription for how to choose among these approaches, let alone facilitate their implementation. These approaches are all variants of differential pricing, and Huefner's book reminds us that the field of revenue...
