1.1 Implementation of Customer Profitability Analysis There are six steps taken in implementing this technique in a company which are select customers, determine revenues and costs, analyze profitability and non-profitability customers, develop strategies and review the affects. We decided to choose Perodua as one of the local company that implements this technique.
Determine Costs
Determine Costs
Determine Revenues
Determine Revenues
Select Customers
Select Customers
Diagram 1.1.1

Analyze profitable and non-profitable customers
Analyze profitable and non-profitable customers
Develop strategies
Develop strategies
Review the affects
Review the affects

Based on Diagram 1.1.1, first step shows that a company should select their customers based on customer segmentation. The basis of customer segmentation will differ across the companies and across the industries. There are two basic approaches to customer segmentation which are demographic segmentation and psychographic segmentation. Demographic segmentation based on observable characteristics such as geographic area, customer age, sex and income level. Psychographic segmentation based on customer needs and behavior such as customer values, attitudes, and interests.
Perodua has selects their customers based on customer segmentations. Currently, there are two types of customer selected by Perodua which are high cost customer and low cost customer. High cost customer refers to the people which has high income level and low cost customer refers to the people which has low income level such as students.
Once the customers have been identified, the annual revenue is calculated for each customer. This will depend on the products offered by the company. Adjustment to the price paid by the customer for the product such as discounts must be included to determine the true amount of revenue generated by