Explain the relationship between cost allocation and customer profitability. Why is determining customer profitability important to a business, and how can appropriate cost allocation help accomplish that goal? Focus on the following five main factors that businesses can use to evaluate customer profitability:Discuss how and why examining these variables can help a business increase its overall profitability.
- Likelihood of customer retention
- Potential for sales growth
- Long-run customer profitability
- Increases in overall demand from having well known customers
- The ability to learn from customers