Customer Profitability Analysis

Customer Profitability is how closely to provide services to consumers with regard for the loss of profit of the company. His analysis is refer to as customer profitability analysis. In this analysis calculate revenue (income) that is carry out by a customer all he became that company products customers (lifetime value of customer).

These revenue estimates are then compare to the cost of acquisition (customer acquisition cost) and also loyal customers so that maintenance costs (maintenance cost). If higher revenue potential, means that customers benefit. But if it is lower, then the customers it does not contribute any profit for the company.

CPA (Customer Profitability analysis)

Customer Profitability analysis provides information that is important for the company to decide what to do and how to do it. This analysis will help you determine:

• How many of your customers is profitable for the company?
• Depends on it your company against the profitable customers
• And, how much is the cost for the profitable customers
• The cost to serve customers that include advertising, marketing, administration and service after sales
• Which Customers are targets of your competitors

With CPA firm can analyze the likely profitability of customers become more relevant to the service, other than that the CPA is also important to know the profitability of customers through the identification of the costs and the benefits this type of customers or customer specific to vastly improve an overall profitability.
In above figure, columns represent customers and rows represent products. Each cell contains a symbol for the profitability of selling that product to that customer.

Customer Profitability Analysis

• Customer 1: Person is very profitable customer. Person buys three profit making products. (P1, P2 and P4)
• Customer 2: Person yields a picture of mix profitability. Person buys one profitable product (P1) and one unprofitable product (P3).
• Customer 3: Person is losing customer because person buys one profitable product (P1) and two unprofitable products (P3 and P4).

Here, customer 2 and customer 3 are unprofitable customers for a company. The company can do the following activities about them.
Customer profitability is the result of applying the business concept of profit to a customer relationship. Measuring the profitability of a firm’s customers or customer groups can deliver useful business insights.

CPA Analysis & review outputs

And to correct all of that company can analyze where profit profitable and not beneficial for companies where profit is not profitable can be advantageous for companies with establish better communication to the customer.

Accommodating the aspirations of our customer (feedback) feedback for the company, with the criticism and suggestions so the company could fix whatever flaws exist in the company so that it can more deeply satisfying.  In addition, customers can create products that are more qualify that can satisfy the customers in terms of price, then also enter in all walks of life.

In this customer profitability analysis calculate revenue (income) that is carry out by a customer all he became that company products customers (lifetime value of customer).

These revenue estimates are then compare to the cost of acquisition (customer acquisition cost) and also loyal customers so that maintenance costs (maintenance cost).

If higher revenue potential, means that customers benefit. But if it is lower, then the customers it does not contribute any profit for the company.

Smart marketers always want to establish a strong relationship with profitable customers. Marketers have to bear many costs and efforts to attract, deal and maintain customers. All such expenses should be recover for profitability. They should measure profitability. They should focus on the lifespan of income and expenditure. In this regard, customer profits are the difference between the income receive from customer relationships and the difference in costs over the specify period.