analyze-customer-profitability

name	analyze-customer-profitability
category	data
description	Analyze customer or segment profitability using net revenue, direct costs, cost to serve, and transparent shared-cost allocations. Use when reviewing pricing, service design, retention, or account strategy.

analyze-customer-profitability

Make cost attribution and decision boundaries visible before ranking customers.

When to use

• Use for account planning, pricing review, capacity decisions, or segment economics.
• Do not automate harmful treatment, deny essential service, or proxy for protected traits from a profitability score.

Preconditions

• Confirm decision scope, permitted customer data, reporting period, currencies, and approved cost-allocation policy.
• Reconcile revenue, refunds, direct costs, support, fulfillment, and payment data.

Procedure

1. Define customer identity and related-account mapping at a stable grain.
2. Calculate net revenue after discounts, credits, refunds, rebates, taxes, and revenue sharing.
3. Attribute direct product, fulfillment, payment, returns, onboarding, support, and customer-specific infrastructure costs.
4. Allocate shared costs only where a defensible driver exists; show unallocated and alternative views.
5. Calculate contribution dollars and margin by customer, cohort, product, channel, and tenure.
6. Adjust comparisons for contract stage, implementation period, seasonality, currency, and one-time events.
7. Reconcile aggregated revenue and costs to approved financial reports.
8. Test sensitivity to allocation, support-cost, churn, and renewal assumptions.
9. Combine financial evidence with contract, strategic, service, fairness, and capacity constraints before recommending action.

Worked example

A large customer appears unprofitable after equal allocation of all corporate overhead. A driver-based view shows the account has high onboarding cost but positive ongoing contribution. The report separates temporary implementation cost, shared overhead, and recurring service cost, then recommends a renewal and support-design review rather than an automatic termination.

Done

• A profitability model records identity, net revenue, cost attribution, allocation choices, contribution, segments, and lifecycle effects
• Financial totals reconcile and recommendations are checked against sensitivity, privacy, fairness, contractual, and service constraints