The Study Of Profitability Evaluation Based On Customer Equity

Customer equity refers to the sum of discounted present value of customer lifetime value of the enterprises. It’s not only the foundation of survival and the development of enterprises, but also a source of the business profits. By the profitability evaluation based on customer equity, it can help the enterprises to distinguish the profit-making customers and non-profit customers correctly, and configure the limited marketing resources in the profit-making customers, to improve the overall profitability of the enterprise. Comparing with the traditional profitability evaluation which using uniform index system, the profitability evaluation based on customer equity has more advantageous. It will become the hotspot of financial management studies.The profitability analysis based on customer equity is to comparing the cost generated by the customers with the revenue generated by the customers, to calculate whether the customers are profitable or not. As the customer demand has the dynamic characteristics which changes unceasingly, for the profitability analysis based on customer equity, it including two aspects:First,"existing" profitability analysis of the customer equity, it shall be carried out by using activity-based costing; Second, the "future" profitability analysis of the customer equity, it needs to calculate the customer lifetime value. For a long time, the profitability evaluation only attaches importance to product-centric financial targets, and has neglected the evaluation of the stability and lasting impact of corporate profitability. The customer equity carefully examines the enterprise profitability from the brand-new angle, and replies that who is the creative source of profit. The Income Statement prepared in accordance with customers is able to accurately reflect the profitability of the enterprises and the corporate long-term value. Therefore, in the enterprise profitability’s appraisal system, the introduction of The Income Statement based on the customer equity e has the important theoretical significance and practical significance.There are five parts consisting in the thesis. The paper has introduced the research background, the research goal and the significance, and has carried on the commentary to the domestic and foreign related literature at first. The second part has elaborated the customer equity and profitability and other correlative theories foundation, and also the relationship between them. It has settled the solid foundation for the profitability evaluation based on customer property. The third part, profitability evaluation based on customer property, is the focus of this paper. This part will explain the computational method of profitability of the customer equity in detail, by the analysis of the existing profitability and the future profitability. And it will construct the Income Statement based on customer, compared with the traditional Income Statement, then arrive at the Income Statement based on customer has more advantages. The fourth part is the theoretical research part. The paper takes the Guangming Corporation as the background, and indicates how to use profitability evaluation based on the customer equity, comparing with the traditional profitability evaluation, obtains the customer property profitability’s superiority. Then the paper proposed how the company promotes the customer profitability. Finally, the paper summarized the research results, and pointed out the existence flaw as well as the future research direction in the fifth part.