Back in the mid-1990s, David Wells was a financial analyst for a Bay Area supply chain management company that boasted an impressive list of Silicon Valley marquee customers.

Counted among their clients was a large chip maker whose customer relationship upkeep had over time become Wells’s responsibility. Because this was a coveted customer, Wells always sought to be highly responsive to any of the chip maker’s requests for information, but he increasingly found his company’s pricing model out of step with the customer’s needs.

“There was a lot of confusion and a lot frustration over what the prices for our services and products should be. Basically, we needed a much more sophisticated pricing model that the customer would accept,” recalls Wells.

Faced with growing customer unrest, Wells and a colleague created a new pricing model that was carefully tailored for the chip maker’s business.

Says Wells: “It was very intricate and more specific, but it was modeled exactly the way the customer saw their business.”

The customer quickly gave the new model a thumbs-up, and all was well—until roughly 4 months later, when Wells realized that the new model was about to deliver to his company a windfall that would generate 4 to 5 months of revenue within only 6 weeks.

“When I saw what was happening, I went to the customer and said, ‘Listen, this model that we built … there’s kind of a flaw in it. It’s a flaw in our favor, but we didn’t intend for this to happen and we don’t want you to view us as being unethical,’” recalls Wells.

To Wells’s surprise, the chip maker was not concerned about the imminent financial swell of its purchases. It was instead highly pleased to have had a model created specifically with its needs and requirements in mind.  

“What this taught me was that as a CFO you’ve got to understand the customer and you’ve got to understand your business,” explains Wells, who believes that finance chiefs must first have visibility into customer engagements to better understand the inner workings of relationships with them.   

He continues: “If you can distill it down into tools that will then quantify the activity, then as CFO you’ll be in perfect shape to make the right decisions both for the customer and for your company.” –Jack Sweeney