What is Customer Profitability Analysis? Definition and meaning

Customer Profitability Analysis

Definition: Customer Profitability Analysis (CPA) is a marketing and management accounting method, allowing businesses to determine the profitability of each customer or segments of customers, by attributing profits and costs to each customer or segment separately.

CPA can be applied at the level of customer aggregates / groups / segments or even at individual customer level (most time consuming, but providing a very precise understanding of a business situation).

Firms should not simply focus on the highest revenue yielding customers, but are better off understanding customer profitability before choosing target audiences.

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