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As Lindsay (1994, 1995) encourages validation of existing results, this research replicates Guilding and McManus (2002) in a New Zealand (NZ) context. The usage and perceived merit of customer accounting practices were lower in NZ than in the Australian study. Few of the regressions where customer accounting usage and perceived merit were dependent variables revealed a statistically significant role for competition intensity and market orientation. There was some minor support for the perceived merit of customer accounting being higher in companies experiencing medium levels of competition intensity.

The aim of the paper is to show how intelligence emanating from customer profitability analysis (CPA) can help improve strategic marketing planning. Insights into the profitability of individual customers, as well as the distribution of profitability across the customer base, can lead to better decisions in the areas of managing costs and revenues, managing risks and strategic market positioning.

The concept and process of CPA are first explained. The heart of the paper then discusses how the outcomes permit novel analyses related to costs and revenues, risk, and strategic positioning. Finally, the paper explains what is needed to make the shift from retrospective CPA to prospective CPA.

CPA delivers two types of insights: the degree of profitability for each individual customer, and the distribution of profitability among customers within the customer base. Profitability data at the level of the individual customer support better decision making about service levels, marketing investments and pricing strategies. The profitability distribution curve yields information about the vulnerability of future cash flows from customers. Further, DPA data permit segmentation and targeting on the basis of profitability and the development of different value propositions for different profitability segments.

Shareholder value is created through cash flows from customers. CPA uncovers where these cash flows are generated. Armed with customer profitability data, marketers can really develop and implement value‐driven differentiated customer service strategies.

While quite a number of published papers have discussed the technicalities of calculating customer profitability, this paper adds to the literature an overview of how the outcomes of such calculations can help planners make better decisions, to increase the magnitude of cash flows from customers and/or reduce the volatility and vulnerability of such cash flows.

This paper aims to assess the usefulness of cost‐to‐serve for customer profitability management through literature review and a case study in a food‐industry company.

The research is based on a case study. The study presents the state‐of‐the‐art of the literature review related to cost‐to‐serve measurement and customer profitability analysis and a case study of a Brazilian food‐industry company with high operational complexity and an extensive customer product and commercial service line.

The literature review demonstrates that few empirical studies have actually addressed the problem of cost‐to‐serve measurement and customer profitability analysis. The findings of the study show that the measurement of cost‐to‐serve provides specific and detailed customer information that enables a more comprehensive customer profitability analysis than the classical paradigm.

A single case study does not allow the results to be generalized to other organizations.

The paper includes a comprehensive review of literature and the empirical case study in a Brazilian food company offers additional insights in cost‐to‐serve measurement and customer profitability analysis.

Preface The functions of business divide into several areas and the general focus of this book is on one of the most important although least understood of these—DISTRIBUTION. The particular focus is on reviewing current practice in distribution costing and on attempting to push the frontiers back a little by suggesting some new approaches to overcome previously defined shortcomings.

To achieve a full understanding of the role of marketing from plan to profit requires a knowledge of the basic building blocks. This textbook introduces the key concepts in the art or science of marketing to practising managers. Understanding your customers and consumers, the 4 Ps (Product, Place, Price and Promotion) provides the basic tools for effective marketing. Deploying your resources and informing your managerial decision making is dealt with in Unit VII introducing marketing intelligence, competition, budgeting and organisational issues. The logical conclusion of this effort is achieving sales and the particular techniques involved are explored in the final section.

Upon completion of the case study discussion, successful students will be able to define and list the steps of time-driven activity-based costing system (TDABC); understand and explain the ideas behind the TDABC; implement the TDABC in customer profitability analysis; draw connections among the cost and profitability analysis; evaluate the importance of better costing techniques in profitability analysis; and make managerial decisions based on TDABC analysis.

Gluten Limited’s financial affairs and operations manager, Fatih, was aware that the company was making very little profit from its operations with its biggest customer. The main reason appeared to be that it delivered its products in bulk to the main warehouses of the customer, which then distributed them to the stores. Fatih believed that products were being sent to stores late, so that their expiration dates passed quickly and they ended up being returned.

The case study documents the past year of Gluten Limited’s delivery operations with one of its biggest customers. It focuses on the effectiveness of its delivery operations and ways to increase profitability by reducing sales returns. The case dilemma involves the choices that Fatih faced following a six-month trial period: either delivering products in bulk to the customer’s main warehouses at lower cost but higher return rates or delivering small amounts directly to stores at higher cost but lower return rates. Fatih needed to decide which mode of customer operations was more profitable and continue that way.

Knowing the importance of determining costs properly in profitability analysis, Fatih made the cost calculations using the TDABC system.

This case was written for use in Cost Accounting and Managerial Accounting classes at the undergraduate level. The focus of the case aligns well with discussions of customer profitability analysis, cost reductions, eliminating non-value-added activities, and profitability of operations. Instructors seeking to emphasize the most suitable costing methods for customer profitability analysis could assign this case.

Teaching notes are available for educators only.

CSS 7: Management Science

The purpose of this paper is to explore the links between customer loyalty attitude, customer loyalty behaviours (measured by customer purchase behaviours) and profitability. The aim is to define a conceptual framework within which to analyse the relationships between attitudes, behaviour, and profitability of the customers.

Reference was made to earlier studies which argued that loyal customers constitute competitive asset of business organizations. Several authors noted that customers generally vary in terms of loyalty behaviours and attitudes and highlighted that differences about customers' loyalty levels affect a firm's profitability results. Customer loyalty, its antecedents and outcomes, and the links between customer satisfaction, customer loyalty and profitability have been analyzed at a customer level.

The results showed support for all but one of the five hypotheses, the exception being H2.

The results of the study provide evidence that a Loyalty Index can give managers an adequate support for market segmentation. This means that actual market segment strategies, based on geographical, demographical and/or psychographic variables, should take into account also loyalty measurement models.

The purpose of this study is to propose a comprehensive strategic model to manage profitability. Strategic management accounting concepts and tools are adopted to explore and manage the main profitability drivers (cost, assets, and revenue).

A deductive approach is used to identify the variables of the profitability model. Phase one of this study rely on reviewing prior literature in the field in order to identify the key profitability drivers that uses in managing profitability (costs, assets and revenue).Phase two of the research focuses on testing the perceptions of the managers of Egyptian “Information and communications technology” sector, the relative merits of such a model.

The most important finding in the current study, which has not been investigated in previous studies, is that the proposed comprehensive profitability model which contains cost, the assets and revenue techniques was a better predictor of profitability than the alternative models, which contain a combination of two variables.

As the first study of its kind, this model contributes to the theoretical literature in the field. It is also a practical contribution in managing profitability of the Egyptian “Information and communications technology” sector.

The specific purpose of this article is to describe customer profitability analysis and evaluate its compatibility with quality management systems. Besides, its more general objective consists in shedding further light on the links between management accounting and quality management, which is still an emerging topic.

The first part of the document presents a theoretical description of the disciplines and tools that are relevant to the study. Afterward, an explanation of the way in which customer profitability analysis is operationalized in practice is provided. Subsequently, a framework for the incorporation of customer profitability analysis into a quality management system is introduced. The final section includes some recommendations for future research.

Through the analysis of the benefits of the incorporation of customer profitability analysis into an ISO 9000 model, the study provides further support to the premise that the joint consideration of management accounting techniques and quality management tools is beneficial to organizations.

The article combines two disciplines closely related in practice but seldom concurrently addressed in the literature.

Many banks and financial institutions have resisted the opportunity to model customer profiles because of the cost of developing and maintaining customer profitability information based on the capture and storage of individual transactions. This paper describes the development of such a model to calculate customer profitability, by putting into place systems which allow the capture and analysis of accurate, up‐to‐date information regarding the transactions of individual customers. The implementation of the model within one regional Australian bank is detailed, together with an indication of its potential for operational and strategic decision making. We speculate that such a model might be more widely adopted to allow banks to focus effectively on the most profitable segments of their business.