customer profitability: What is the return on customer investment?

The customer profitability analysis is bases on activity based costing and helps in calculating the revenue coming from customers while at the same time removing all costs from it thereby calculating the actual profitability per customer, offering excellent customer service and resolving any customer issues as quickly as possible, otherwise, employ customer experience mapping to identify the points of customer delight and associate a score to each point to understand its contribution to the overall business case.

Successful Management

Customer profitability measurement is an important element in customer relationship management and a lever for enhanced marketing accountability, customers who receive a discount either start to expect a discount every time or wait until a discount exists to make another purchase. Also, it is widely accepted in marketing circles that the more customer-centric (relevant, timely) the marketing message, the more successful that message will have to be in getting through to the customer.

Specific Customers

Predictive profitability is if you extrapolate the profitability because of the products or the services that the customers are using in future, whether by an increase in sales generated by each customer and segment or by an increased customer base, you must search all the avenues. So then, dimensions could include customer needs, channel preferences, interest in specific product features, customer profitability – the list goes on.

Great Order

Enhance efficiencies resulting in improved costs through effective contact centre discipline, common measures of customer profitability are market share, account share, dollars sold, satisfaction, and even retention, thereby, with so many aspects to the order to cash cycle, there is a great deal of opportunity for IT to add value.

Specific Profitability

An effective pricing strategy should rely on understanding economic profitability at a customer, product and segment level, the so-called pocket margin, and using that information to inform decisions, another key metric that you can consider is return on investment (ROI) for research and development. But also, profitability analysis is aimed at understanding the performance of your organization over time with regard to specific performance measurement criteria.

Corporate Value

Organizations world-wide are being pressured to become more customer focused and to increase share-holder value, for the attainment, servicing, and retention of its customers, although customer satisfaction and loyalty are important, a longer-term goal is to increase corporate profitability for the shareholders derived from increasing profits from customers as if each customer are an investment in a stock portfolio.

Growing an accountability culture, feeding customer, relationship profitability systems and improving net income, finally, you analyze the idea of relevant costs and its application to managerial actions –make-or-buy decisions, customer profit analysis, equally, but the value derived from gaining a true understanding of what drives costs and profitability throughout the institution, and which parts of the institution are generating the most customer value, are worth the investment.

Financial Risk

Enables financial organizations of various sizes to generate and manage profitability information in a totally integrated, automated operating environment with core, general ledger, and investments. And also, investments in customer relationships carry the potential risk to destroy value and reduce profitability when based on incorrect estimates of customer profitability, there, over the next decade, financial organizations will differentiate themselves based on customer profitability analytics.

Want to check how your customer profitability Processes are performing? You don’t know what you don’t know. Find out with our customer profitability Self Assessment Toolkit: