Discover how Customer Profitability measures how much profit a business earns from individual customers or customer segments. Learn how to calculate, analyze, and optimize this KPI to focus on high-value relationships and drive sustainable growth.
Marketing, Ecommerce
Lagging Indicator
Customer Profitability = Total Revenue from Customer − Total Costs to Serve Customer
Tracks profit from individual customers or segments by factoring in revenue, support, marketing, service, and retention costs, helping businesses assess customer-level ROI.
CRM systems (HubSpot, Salesforce), QuickBooks, Stripe, ProfitWell, NetSuite, Google Analytics (with LTV & cost tracking integrations).
Tracked quarterly or annually to guide long-term strategy, pricing models, and customer success planning.
Increase customer profitability by 15% in Q3 by reducing support costs and prioritizing retention strategies for high-LTV customers.
A Finance or Customer Success Manager tracks Customer Profitability to identify high-value vs. low-value segments. If some customers are unprofitable, the team may adjust pricing, limit costly support, or reallocate marketing spend.
Focus more resources on customers who deliver the highest margins over time.
Use automation, self-service tools, or tiered support to serve customers more efficiently.
Maximize value from existing relationships by offering relevant add-ons or premium plans.
Identify campaigns or channels that attract customers with the best long-term value.
Customer Profitability is a key performance indicator (KPI) that measures the net profit a company earns from an individual customer or customer group over a specified time period. It is calculated similarly to overall profit by considering both revenue generated and the costs incurred to service that customer. Unlike traditional product-focused profitability metrics, Customer Profitability Analysis shifts the focus to understanding the true value each customer brings by isolating service-related activities and expenses. This insight helps businesses optimize resource allocation, refine customer strategies, and prioritize high-value relationships.
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