The contribution to each customer or a group of customers to the organization’s profits differ.
For example a bank may have many customers but one or two customers may be their premium customers in terms of their contribution to their Profit.
Likewise, a Solicitors firm may have many clients but the contribution of each client to the bottom line differs.
Research has shown that a small proportion of the customers i.e. 10%, contribute a bigger percentage of profits.
40% of customers contribute moderate profits while the last 40% may actually be contributing nothing to the profits of the company.
The essence of the customer’s profitability analysis, is profoundly, to enable the organization fashion out policies and strategies that would create more value for its most profitable customers.