In today’s competitive environment, profitability analysis is not just about looking at the profit and loss statement. It is more about knowing which of the organizations customers are making them money and which are losing them money. This paper considers how activity-based costing approach may complement a customer relationship management effort. The model presented in this paper combines the principles of activity-based costing with performance measurement. Applying this model helps managers understand the true costs of providing products and services and the factors that drive these costs, while addressing other concerns such as customer satisfaction.