Relationship between profit and customer

Relationship between profit and customer

The customer and profitability has great relationship and this is due to varying cost for different group of customers. The organization may be making different profit from different customer group. Following are the some of the reason for different profit percentages.

1. Discount Offer

High discount is offered to some customer for bulk order. High discount offer is on one hand an expense for the organization because of sacrificing some profits, but on other hand it reduces some costs like storage related costs of inventory and transportation to many customers.

2. Quality Issue

Some group is more quality sensitive and therefore company has to ensure the quality. The more controls requires more expenditure for maintaining the quality. For example a restaurant in main city requires more quality controls than a restaurant operating in a small town.

3. Customer Service Level

Some customer group need more detail information about the product and more information need require more investment on customer service department. For example the small town user of credit card needs more information about the credit card industry then big city users.

4. Promotions

Some customer group needs intensive promotional campaign to attract the customer. For example if a company want to launch a new product to a new market requires more promotional activity than existing market.

5. Different Sales methods

Different sales methods involve different costs. For example a direct selling is more profitable than using a distribution network.