A company that assigns actual marketing costs to customers based on the costs of performing...

Question:

A company that assigns actual marketing costs to customers based on the costs of performing various marketing activities is conducting a customer __________ analysis.

A. retention.

B. relationship.

C. profitability.

D. loyalty.

Assigning Marketing Costs:

Marketing costs refer to the expenses incurred by a business in an attempt to promote its products. A perfect example of marketing costs is the costs of advertising and customer surveys.

Answer and Explanation:

The company is conducting a customer profitability analysis. The analysis can also be referred to as a credit underwriting method. Essentially, it is used by businesses to determine the profitability of each customer. The move is attained, trough the ability to attribute profits and costs to customers separately. In other words, it is a management accounting tool that plays a significant role in shifting the attention of product line profitability to an individual customer. The tool helps companies to identify specific costs incurred by the business while serving a particular customer. The method differs from others, which attribute the cost to each product.

Customer profitability analysis can also be used to focus on a given segment of customers other than an individual customer. The information obtained helps businesses to understand the set of customers that greatly contribute to the profitability of the business. Besides, it is useful in undertaking targeted actions aimed at improving the profitability of the business.


Learn more about this topic:

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Using Break-Even Analysis to Evaluate a Marketing Plan

from UExcel Principles of Marketing: Study Guide & Test Prep

Chapter 3 / Lesson 4
3.9K

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