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How To Find Your Angel vs Demon Customers: A Q&A with Gary Cokins
Why identical customers have wildly different profit margins - and how to measure the real cost of serving them
Gowtham Ramachandran
December 04, 2025
If you're a supply chain director, operations manager, or finance leader, this will sound familiar:
You're defending budget decisions with profit and cost data that doesn't match reality. That "profitable" customer actually drains resources and their expenses through constant change orders and rush deliveries. Two customers with identical revenue have completely different true costs, but your accounting system treats them as the same.
Back when I ran my electronics manufacturing company, I had this exact problem. The customers that looked profitable on paper were bleeding us dry through service calls, custom specs, returning shipped products, and supply chain chaos. I knew something was wrong but I couldn't prove it.
Recently, I discovered Gary Cokins' work on activity-based costing (ABC). Gary pioneered methods that track what actually drives costs instead of spreading overhead like peanut butter across bread. He's helped mid-market manufacturers uncover the real economics hiding behind their P&Ls.
His key insight: your most profitable customers might be your biggest profit destroyers. Two customers with identical revenue can have vastly different margins depending on the operational complexity they create and how demanding they are. He refers to a book titled “Angel Customers and Demon Customers” that describes this reality.
In this Q&A, Gary breaks down his rapid prototyping with iterations implementation approach to building accurate cost systems, explains how to identify "angel" versus "demon" customers, and shares why traditional budgeting methods are failing supply chain leaders.
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