Why is customer profitability analysis important in e-commerce?

Yes, it's important to know a customer's profitability. You might think that the more customers you have the more the profit. This is often false, even a large-sized customer can turn out to be unprofitable. By knowing the unprofitable customers you can focus on the profitable ones and increase profit by cutting out the unprofitable ones.

Measuring customer profitability is crucial for business as it helps determine whether customers are costing you money. Such findings can help you shape your business strategies and direct resources accordingly. It all comes down to the customer servicing costs incurred by your company on a specific group of customers.

By defining your customer segments, you can easily track the profitability of each customer group. Customer profitability analysis also gives you an overall look at the customer touchpoints that ultimately boost your business strategy.