What is the customer's profitability?
The profitability of customers is the process of determining whether the amount of resources issued to obtain and maintain the relationship with the client more or less than the benefits generated by this relationship. In the most stringent sense, the profitability of the relationship is based on the difference between the costs of time and deliveries consumed by the relationship and income that is generated by the sale made to this customer. Other formulas also allow indirect benefits, such as the oral word that the customer provides, and to what extent the recommendation of this customer leads to the acquisition of other customers.
The most common model for determining the customer's profitability includes assessing what is called the customer's cost. These are simply all costs associated with the effort for sale and customer service focused on this customer. Examples would include both direct and indirect costs such as wages and Salaries of workers who interact with the customer, the average cost of promotional materials sent to the client and any discounts extended as an inventoryKY to open an account.
If the costs associated with securing and maintaining an ongoing relationship with the client are completely compensated by income generated from the sale to this customer, the relationship is considered a uniform point. Here, indirect advantages of the relationship can add a certain degree of customers' profitability. If the client recommended the company to several acquaintances who subsequently became customers and generated income for the company, this intangible advantage to continue the relationship may be sufficient, even if only no profitability is obtained directly.
When generated revenue exceeds the cost of securing and maintaining a customer's relationship, the customer's profitability is easily measured. Ideally, this profitability includes tangible and intangible benefits where the generated income flow is far beyond the cost of maintenance of the account and the degree of customer loyalty is that the client normally promotes products offered by the company. AsMany businesses understand the maintenance of customers' profitability means to own a strong ethics of customer service, which includes quickly and efficiently handling customer complaints, as always listening to the customer's voice, regardless of the nature of the question, comment or concern. Inability to deal with customer complaints or in any message to the customer that it is not worth the effort to open the door to competitors and win this client away, maybe never return