Customer Profitability And The Influence To Market Targeting

Philip Kotler said, one of the shortest definitions of marketing is "meeting needs profitably." Customer profitability is that it is how much a customer contributes to the company's profit. Without a doubt customer-profitability analysis is a hot topic-especially for companies that embrace customer relationship ideas, because without it interpretations of CRM failures or successes are mere speculation. Hence, it is remarkable how seldom this analysis is discussed in the context of existing finance and accounting practices.Whatever the reasons, management need to understand why accounting systems, the data sources of traditional profitability analysis, are ill equipped to support customer profitability analysis and how to fix their shortcomings. Customer profitability measurement is challenging to implement; it draws into question our understanding of market targeting, who our customers are and how a business organization make profit.It can add powerful insights throughout a business, helping to focus decision making energies on doing what is right for the customers and the shareholders at the same time. In a customer-centric organization, measuring customer profitability has become a business imperative: without it there is no fact basis for managing the value exchange between the company and customers. Our sense is that organization management can not afford to manage without these facts as they make decisions concerning market targeting of their business, especially if their competitors have them.