Segmenting customers as a result of customer profitability analysis would be done by which of the following groupings?
A) geography such as state or by zip code
B) operating income
C) gross margin
D) total direct costs

Question

Quizplus · Accepted Answer

Customer profitability analysis involves analyzing customers based on their profitability, which means the revenue they generate minus the cost of serving them. Operating income is a good way to measure profitability as it reflects the revenue generated after deducting all operating expenses. Therefore, customers can be segmented based on their operating income to identify high-profit and low-profit customers. Segmentation based on geography, gross margin or total direct costs may not be a suitable way to identify profitability as these factors may not accurately reflect the revenue generated or cost incurred by serving a particular customer.

Segmenting Customers as a Result of Customer Profitability Analysis Would