Maximizing Profits: How Calculating Customer Profitability Can Transform Marketing Strategies
The article discusses how to calculate customer profitability by analyzing revenues, product costs, and costs to serve for each customer. This helps companies understand which customers are most profitable and make decisions on customer acquisition and retention. The key elements in the calculation are customer revenues, cost of goods sold, costs to serve, and customer-specific overheads. By completing this analysis for all customers, businesses can identify customer dependency, balance acquisition and retention efforts, and determine payback periods.