Decent Essays
Customer profitability analysis (CPA) can be defined as a method used to compare the costs of all the activities used to support a customer or a customer group with the revenue generated by that customer or customer group. It is the analysis of the revenue and costs that relates to the customers which can be determined by considering the similarities and differences in customers’ buying behaviours and customer preferences.
From the definition, it shows three features of customer profitability analysis. First, customer profitability analysis assigns the costs to individual customers rather than products, services or departments. It allows management to determine which of the customer is profitable or if
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For example, taking an order from the customer, processing an invoice, packaging the product and lastly deliver the product to the customer.
For the second level is customer level activity. It relates on how company managing the customer in terms of acquiring the new customer and maintaining the existing customer or customer group. In this stage, company should know are the element that emphasize by the customer. Customer usually wants higher quality of product at a lower price. Then, they also demand a good service from the company not only during buying the product, but also after sales. To attract the new customer, company can attract by making an initial call and advertise about the new products and what is the special feature. Furthermore, company can make certain promotion to attract the new customer because majority of the customer love to buy the product at lower price. To maintain the customer, company can give samples to the customer so that they can update themselves with the new product. By giving technical support to the product that have been bought by the customer as well as handling the complaint also can retain the customer from moving to the competitors or switching to the other products.
For the third level is market level activities, it relates with the particular markets or class of the customers. This stage is very important as company need to know what their customer wants the most so that they can satisfy their
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