Cherry-Picking Strategic Concept

“Cherry-picking” refers to the practice of identifying and targeting the most profitable customers in a market, rather than serving them all. In any market, customers are not created equal. The most profitable buy high margin products and are low cost-to-serve – the most unattractive are highly price sensitive and costly to serve.

Cherry-picking the most attractive customers is a common approach for new entrants or raiders from an adjacent business, since they can focus their limited resources not disperse them over the whole segment.

If you are cross-subsidising unprofitable customers from more profitable customers or if don’t know your real profitability by customer (e.g. if you apply average costing not Activity Based Costing) you are very vulnerable to this type of attack.