n Management Dynamics : Journal of the Southern African Institute for Management Scientists - Understanding enterprise profitability using a customer profitability cycle framework

Volume 12, Issue 1
  • ISSN : 1019-567X



Creating and sustaining customer demand is a cornerstone of an enterprise's drive to enhance profitability. In order to enhance long-term profitability an enterprise is required, among others, to create and cement long-term relationships with customers. However, the dynamics of the market environment are changing, and it has become increasingly difficult to understand the behaviour of customers and how customers could become more profitable to the enterprise. This article proposes a customer profitability cycle (CPC) framework consisting of four interlinked decision-making stages and three analytical tasks, which could be used to understand the relationship between an enterprise and a customer from the time of acquisition. Theoretically, over time, a customer should contribute more and more to the long-term profitability of an enterprise if understood correctly. Each decision-making stage is intended to build on the strength of the relationship forged with the customer during each of the previous phases, and in that manner long-term profitability is enhanced throughout the cycle. During each stage it is possible to use knowledge obtained from applying data mining (predictive modelling) techniques to customer data as enhancing analytical tools. However, customer knowledge is of little significance if not used for strategy formulation, business process refinement, and business planning.

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