Non-core customer

A customer whose pricing and cost-to-serve characteristics allow the company to realize a positive cash flow, but a negative return on net capital employed, on the sales made to the customer through the business cycle.
(See also Core, Near-core)

Example 1:

Hertz has had to close some offices. Problems in the oil-country markets emerged in January 1986 and led to the closing of sites in Shreveport, Tulsa and Arlington.
(Year 1987-SIC 7353)

Explanation: Lay-offs in these geographic areas have reduced demand for the Hertz product to such a degree that the geographic area becomes a Non-Core Customer location. Hertz, therefore, withdraws as it fails to generate cash at the site.

Example 2:

ProSource, Inc. pruned its less profitable accounts that had a positive effect on operating profits. The company reduced variable costs and freed up additional capacity that could accommodate the growth of higher-margined accounts. That program eliminated 604 restaurants and $74 million of 1995's revenues from the customer base.
(Year 1997-SIC 5141)

Explanation: ProSource eliminated 604 Non-core restaurant customers in order to improve its profits and return on investment.

Example 3:

Home Depot will begin testing its Villager's Hardware concept with four stores in New Jersey. The stores will be only one-third the size of its warehouse-style Home Depots and will carry mostly merchandise for small home projects.
(Year 1998-SIC 5211)

Explanation: Home Depot viewed smaller localities as Non-Core Customers. These geographic areas were too small to support a regular Home Depot store. However, in order to serve these Non-Core Customers, the company invented a new concept, better suited to their needs and the company's cost structure.

Example 4:

Thanks to the elimination of three unprofitable hard goods lines — home electronics, sporting goods and photography – gross margins have climbed steadily at J.C. Penney.
(Year 1989-SIC 5311)

Explanation: The customers who purchased home electronics, sporting goods and photography were Non-Core Customers for JC Penny.

Example 5:

Banks are trying to discourage low-balance customers by charging these customers fees that inhibit access to services.
(Year 1987-SIC 6021)

Explanation: Low balance Customers are Non-Core Customers for these banks. They will not support an acceptable return on investment.