What is called "Customer Profitability Analysis"?

Measuring the profitability of a firm’s customers or customer groups to see which customers or customer groups are more profitable to the firm than others.

And  the purpose of such analysis is to focus on the more profitable ones.

CPA is a tool that is used by companies to analyse every customer separately by looking at the profit derived from this specific customer, which is the difference between the revenue generated from and the cost associated with this specific customer. It is helps companies target high-value customersand offer them services that fulfill their needs.

Additionally, it has other benefits like:

- Helps the management by making decisions that will increase profit

- Improve retention and customer loyalty

- Helps sales to optimise their sales activities through personalised offerings.

customer profitabily analysis is the analysis of profitabiltabily with respect to customer. the analysis is carried out beacuse si=ome customer take more specific expense like ordering cost, packing cost etc. the customer specific costs are deducted from the customer profit to find customer profit and then that profit is analyze to different customers to do customer profitability analysis.