Utilizing Customer Profitability Analysis for Increased Focus

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2. How customer profitability analysis can be used by companies in increasing customer focus? What is customer profitability analysis? As has been investigated that customer profitability analysis (CPA) is one method which identities activities of customer service, cost driver and the profitability of individual customer or the group of customer (Blocher, 2013). Further, firms will improve its overall profit and competitive by well performing of the profitability analysis of current and future customers, the implementation of customer profitability analysis will be as follow (Wilson & Gilligan, 2005): a. To distinguish the need between customer groups with different value.
 b. To distinguish the factors that causes difference in the costs …show more content…

Best Buy is one of the largest hypermarket store company in USA, with competition from similar local general merchandise store: K-mart, Best Buy do a research on demographic analysis and daily sales statistic to identity profitable customers (Blocher, 2013). Firstly, Best Buy identify its customers and highlight each category based on different value after analyzing demographics (Best Buy, 2015), for instance, in customer folder: Customer A was a IT geek, Customer B is crazy on a local soccer club, Customer C, a teacher in primary school, and Customer D the housewife. Second, Best buy would renovate its exist stores in different branch based on the more catalogue of customer who living in(Best Buy, 2015). Therefor, some stores is especially designed for a group of customer like A, some became Customer B stores, C stores. For instance, a delicates service stores with exclusive salesman for IT geek like Customer A. If Customer B, a soccer fans buys a headphone, he or she only want to ease his or her demand to listen music instead of the brand. However, Best Buy not only focus on current profit, but also focus on customer group interaction- to analysis customer purchase behavior (Best Buy, 2015). Accordingly, Best Buy would effectively estimate the next purchase and product combination from customer based on this method. For example, normally, a customer will purchase DVD after she or he buys a DVD player but Best buy’s customer profitability analysis indicated that this kinds of customer also buys music accessories in second day after she or he buy DVD. Thus Best Buy would be able to send more relevant e-mail and special combination offer specific customer after customer purchaser behavior

In this essay, the author

  • Explains that customer profitability analysis (cpa) is one method which identities activities of customer service, cost driver, and the profitability of individual or group of customers.
  • Explains the factors that cause differences in the costs of service for each customer group.
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