TY - JOUR

T1 - Customer Profitability Analysis in decision-making–The roles of customer characteristics, cost structures, and strategizing

AU - Lueg, Rainer

AU - Ilieva, Dima

N1 - Publisher Copyright: © 2024 Lueg, Ilieva. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

PY - 2024/5

Y1 - 2024/5

N2 - Purpose This study investigates the interplay between strategic goals and calculative practices, specifically Customer Profitability Analysis (CPA). Drawing on practice-based theories, the research aims to understand how managers strategize with CPA, including the balancing of financial and strategic objectives and the interplay of institutionalized practices with individual practitioners’ actions. Design The study uses a qualitative, revelatory, and exploratory case study approach at the sub-organizational level in a manufacturing company. The researchers compare CPA practices across six departments, guided by a phenomenological research design. Data collection methods include informal conversations, qualitative observations, written documentation, numerical evidence from the accounting system, and interviews. Findings The study offers four novel findings to the field. First, it highlights how managers employ procedural and interactive strategizing to reframe CPA practices. The sophistication of CPA practices increases with unevenly distributed customer volume, high customer-specific, controllable overhead, customer-to-customer interaction, and service complexity. Conversely, the sophistication of cost-focused CPA practices tends to decrease with diverse strategic goals. Additionally, CPA become more effective through the utilization of non-financial information, employee empowerment, localization, and strategic alignment. Second, CPA can be adapted through integrative strategizing where managers avoid using it as a financial benchmark for strategic initiatives. Third, accountants actively seek intermediary roles to incorporate arguments from strategy and marketing to balance strategic objectives–contrary to their portrayal as myopic guardians of profitability. Fourth, the localization of CPA practices to front-line employees compensates for a lack of sophisticated CPA practices. Future research Future research should, investigate the adaptation of calculative practices in different cultures, and industries. Exploring additional contextual factors such as uncertainty, management characteristics, and linguistic framing of practices would be beneficial. Examining the interactions in utilizing CPA practices between front-line staff and customers would shed light on their effectiveness. Lastly, investigating the role of consultants in diffusing such practices would offer valuable perspectives.

AB - Purpose This study investigates the interplay between strategic goals and calculative practices, specifically Customer Profitability Analysis (CPA). Drawing on practice-based theories, the research aims to understand how managers strategize with CPA, including the balancing of financial and strategic objectives and the interplay of institutionalized practices with individual practitioners’ actions. Design The study uses a qualitative, revelatory, and exploratory case study approach at the sub-organizational level in a manufacturing company. The researchers compare CPA practices across six departments, guided by a phenomenological research design. Data collection methods include informal conversations, qualitative observations, written documentation, numerical evidence from the accounting system, and interviews. Findings The study offers four novel findings to the field. First, it highlights how managers employ procedural and interactive strategizing to reframe CPA practices. The sophistication of CPA practices increases with unevenly distributed customer volume, high customer-specific, controllable overhead, customer-to-customer interaction, and service complexity. Conversely, the sophistication of cost-focused CPA practices tends to decrease with diverse strategic goals. Additionally, CPA become more effective through the utilization of non-financial information, employee empowerment, localization, and strategic alignment. Second, CPA can be adapted through integrative strategizing where managers avoid using it as a financial benchmark for strategic initiatives. Third, accountants actively seek intermediary roles to incorporate arguments from strategy and marketing to balance strategic objectives–contrary to their portrayal as myopic guardians of profitability. Fourth, the localization of CPA practices to front-line employees compensates for a lack of sophisticated CPA practices. Future research Future research should, investigate the adaptation of calculative practices in different cultures, and industries. Exploring additional contextual factors such as uncertainty, management characteristics, and linguistic framing of practices would be beneficial. Examining the interactions in utilizing CPA practices between front-line staff and customers would shed light on their effectiveness. Lastly, investigating the role of consultants in diffusing such practices would offer valuable perspectives.

KW - Management studies

UR - http://www.scopus.com/inward/record.url?scp=85194023484&partnerID=8YFLogxK

UR - https://www.mendeley.com/catalogue/b438ce3e-786d-358d-8e27-53a3dbeadc5a/

U2 - 10.1371/journal.pone.0296974

DO - 10.1371/journal.pone.0296974

M3 - Journal articles

C2 - 38776306

AN - SCOPUS:85194023484

VL - 19

JO - PLoS ONE

JF - PLoS ONE

SN - 1932-6203

IS - 5

M1 - e0296974

ER -