Definition of customer profitability analysis

analysis that assigns revenues and costs to major customers or groups of customers rather than to organizational units, products, or other objects. The results may direct rganizational resources toward more profitable uses. It is an application of segmented reporting in which a customer group is treated as a segment. It is especially helpful when combined with an activity-based costing approach that determines which activities are performed for each group and assigns costs based on appropriate drivers. For example, activities, their drivers, and their costs may be classified as order level, customer level, channel level, market level, or enterprise level.