Discusses the issues raised by general criticism of the traditional accounting‐based analysis of profitability and in particular of data quality and relevance, from the perspective of strategic marketing decisions. The major validity problem of profitability analysis is related to the assumption about sales as a cost‐driver for marketing activities. Case studies from two companies illustrate the importance of conducting the analysis based on relevant data. Suggests why and how marketing costs should be allocated to both products and customers.
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