Leadership

Customer Profitability Analysis And Market Valuation: Differential Pricing And The Comparative Profitability Of Major Customer Sales

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Executive Summary

In this study, author investigates whether inferences drawn from Customer Profitability Analysis (CPA) are associated with the information set used by investors valuing firms' equity. This research question is motivated by the recent emergence of CPA as the most important aspect of strategic planning for managers (e.g., Foster and Young 1997). To the extent that managers use CPA in developing strategies to devote more (less) effort to more (less) profitable customer segments, information about differential profit margins across segments of customer revenues should be value relevant in efficient capital markets.

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