Customer profitability
Customer profitability compares revenue with relevant costs of obtaining and serving a customer over the stated period or relationship. Activity information can reveal order, delivery, support and return costs hidden by product margins. Distinguish allocated full cost from avoidable or incremental cost for a decision, and consider retention, strategic links and uncertainty. High revenue or loyalty does not automatically imply high profit.
Worked example
Two customers buy equal revenue, but one places many small urgent orders and returns more goods. Its service activities may consume substantially more resources.
Common mistake
An allocated loss does not automatically mean the customer should be dropped if common costs remain or other benefits are affected.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | APM | Supporting | September 2026–June 2027 |
| ACCA | PM | Supporting | September 2026–June 2027 |