What Is Customer Profitability Analysis?

Customer profitability refers to the amount of profit that a company obtains from a customer per unit of time. In a market economy, customers are the foundation for the survival and development of each enterprise.

Customer profitability

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Customer profitability refers to the unit time,

Customer profitability analysis helps companies identify customer-based opportunities. Companies often rely on accurate estimates and judgments when compiling data. The guidelines listed below can maximize the value of analyzing customer profitability.

1. Sampling survey. Before assessing customer profitability, a small number of customers are sampled. These customers can be selected at random and usually include 16 customers. Calculate its revenues and costs to determine customer turnover and net profit. Then survey customers to understand current satisfaction and future buying tendencies. This information is critical to assessing loyalty and future value. The sample survey has three purposes: to determine whether to conduct a large-scale customer analysis; to find out the main determinants of profitability; and to find a convenient way to get the most revenue.

2. Simplify. In many cases, it is not necessary for a business to adjust every detail of its contact costs. Identify the main determinants of customer profitability, make it easier to collect data and improve understanding of analytics.

3. Cooperation. Divides the responsibility of customer profitability analysis to the managers of various departments, because the increase of customer profitability often requires the cooperation and resource reorganization of various departments.