The overall profitability of the company can be improved by treating dissimilar customers differently.

database that can analyze the profitability of customers at an individual level can be a competitive advantage.

Direct product profitability (DPP) shares many features with activity-based costing (ABC). Under ABC, a wide range of costs are weighted and allocated to specific products through cost drivers—the factors that cause the costs to be incurred.

how much does it cost the firm (on average) to acquire new customers, and how much is it spending (on average) to retain its existing customers?

metrics that measure the performance of individual customer relationships.

helpful to draw a diagram showing the stages of the selling process

When an incentive program is implemented, it may reward the “wrong” salespeople. To avoid this, before activating any newly proposed program, sales managers are advised to apply that program to the prior year’s results as a test. A “good” plan will usually reward the salespeople whom the manager knows to be the best.

For any specific period, the firm needs to know the total amount it spent on customer acquisition and the number of new customers that resulted from that spending. With respect to customer retention, the firm needs to measure the total amount spent during the period attempting to retain the customers in existence at the start of the period and the

Short-term data, however, generally carry a low signal-to-noise ratio. By contrast, data covering a longer time span will be more stable but may obscure important, recent changes in the market.