Business Case Studies & Business Publications

Customer Profit

Pfeifer, Phillip E...

Technical Note

Customer Profit

Pfeifer, Phillip E.; Farris, Paul W.; Bendle, Neil

M-0799 | Published April 20, 2011 | 9 pages Technical Note

Collection: Darden School of Business

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This technical note introduces important metrics firms use to monitor customer relationships. The note begins by discussing how to count the firms' customers and keep track of their activity using the concepts of recency and retention. An important summary of customer activity is the profit the firm receives from each customer. Just as some brands are more profitable than others, so too are some customer relationships more profitable than others. Customer profit is the metric that summarizes the past financial performance of a customer relationship. A companion note, "Customer Lifetime Value" (UVA-M-0800), addresses the forward-looking metric that attempts to put a dollar value on a customer relationship. This technical note is an excerpt of the more comprehensive treatment of customer metrics found in "Customer Profitability" (UVA-M-0718).