BUSINESS ADMINISTRATION
CUSTOMER RELATION MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Detailed explanation-1: -A customer profitability analysis (CPA) looks at the revenue (or profit) that each individual customer generates. While activity-based costing examines individual cost drivers to determine the profitability of a product, a customer profitability analysis applies this same approach to customers.
Detailed explanation-2: -Customer profitability analysis allows you to segment your customers by their profit contribution to your brand and optimize your marketing, customer service, and operations costs around the customer segments who are the most profitable for your brand.
Detailed explanation-3: -How Do You Calculate Customer Profitability? Customer profitability analysis makes use of the following formula to determine profitability: Total profit per customer = Total annual revenue generated – Total costs incurred.
Detailed explanation-4: -Let’s take an example. You have one customer, David. The per-person cost spent on customer acquisition, serving, and selling is $20 per annum. Considering the sales generated by David, which is $25, we can say that his customer profitability is $5.