What is customer profitability in SAP CRM - Customer Relationship Management?

SAP Term: customer profitability

• Component: CRM

• Component Name: Customer Relationship Management

• Description: The profit made with a particular customer after all costs directly attributable to that customer have been deducted from the revenues.

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• Key Concepts: 
  Customer profitability is a concept used in Customer Relationship Management (CRM) to measure the profitability of a customer or group of customers. It is calculated by taking into account the total revenue generated by a customer, as well as the costs associated with servicing that customer. This helps businesses to identify which customers are most profitable and which ones are not, so that they can focus their resources on the most profitable customers.
  
  How to use it: 
  To calculate customer profitability, businesses need to first identify the total revenue generated by a customer. This can be done by looking at sales data or other financial records. Once the total revenue has been identified, businesses need to calculate the costs associated with servicing that customer. This includes costs such as marketing, customer service, and product delivery. Once these costs have been identified, businesses can subtract them from the total revenue to get an estimate of the customer’s profitability.
  
  Tips & Tricks: 
  When calculating customer profitability, it is important to consider all costs associated with servicing that customer. This includes both direct and indirect costs such as marketing, customer service, and product delivery. Additionally, businesses should also consider any discounts or incentives that may have been given to the customer when calculating their profitability.
  
  Related Information: 
  Customer profitability is closely related to customer lifetime value (CLV). CLV is a measure of how much a customer is worth over their entire lifetime with a business. It takes into account not only the current revenue generated by a customer but also any future revenue that may be generated from that same customer. By understanding both customer profitability and CLV, businesses can better understand which customers are most valuable and focus their resources accordingly.