Customer Profitability Analysis (CPA)

What Is Customer Profitability Analysis (CPA)?

Most brands carefully analyze their large-scale profit and loss (P&L) analytics. But the most successful also evaluate their profitability on a more granular level by using a customer profitability analysis (CPA) to understand how much it costs to engage one customer — or one segment of customers — and how much revenue those same customers bring in.

To start, brands calculate the amount it costs them to attract, retain, and provide service for a given customer. This can include the labor it takes to answer customer service requests, the cost of marketing efforts, and more. From there, the brand compares that expenditure to the amount of revenue the customer provides them. This leaves them with a customer profitability analysis (CPA) that indicates exactly how much profit each individual customer or customer segment earns the brand.

With this information, the brand can gain a better assessment of which customer segments are driving the most profit and where to put their sales and marketing efforts in the future.