Application of Activity-Based Costing in Customer Profitability Analysis

With the rapid development of information technology, the competition of market is increasingly severe. The demand of customers tends to individuation, and different customers bring different profitability for corporations, so it is important to analyze the precise customer profitability, to distinguish between different types of customers and to carry out the right management to control costs of marketing and customer support. This paper focuses on the customer profitability analysis, points out the importance of analyzing the customer profitability and classifies the customers into four kinds according to the difference of the customer profitability. Besides, this paper analyses the customer profitability by introducing the activity-based costing, and illustrates the application of activity-based costing in customer profitability analysis by specific cases. It suggests some key factors which influence the customer profitability. And according to various customers, the corporation takes different marketing strategies, ultimately to achieve optimizing the value chains, lowering the costs of products and improving the customer profitability.