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臺大管理論叢
第
26
卷第
3
期
109
A Case Study of Customer Profitability Determinants of a
Pharmaceutical Company
1. Purpose/Objective
In a highly competitive environment, a key question firms face is how to effectively
utilize limited resources to build and maintain good customer relationships, improve
operating performance, and increase firm value. The literature shows that customer retention
is a central driver of customer profits (Ngai et al., 2009). However, it could be
counterproductive for a firm to devote its limited resources to retain all customers because
some may make minimal or negative profit contributions. Therefore, assessing customer
profit contributions and identifying their determinants can help a firm assess the profit
contributions of its various customers to determine which customers to retain and how to
allocate its resources.
This study identifies the determinants of customer profit contributions based on a case
study of a large Taiwanese pharmaceutical company. The analysis of the determinants of
customer profit contribution is a crucial step in customer relations management, because it
provides a clear picture of which customers are valuable and thus which to target for
relationship development. This study suggests that a firm can establish or improve its
customer relations management strategy effectively by examining of the determinants of
customer profit contribution.
We identify and describe four determinants of customer profit contribution: order scale,
order amount, retention cost, and new product purchase ratio. We then develop the following
four hypotheses:
H1: A customer’s average order scale has a positive effect on its profit contribution to
the supplier firm.
H2: A customer’s annual order amount has a positive effect on its profit contribution
to the supplier firm.
H3: A customer’s retention cost has a negative effect on its profit contribution to the
supplier firm.
Chin-Shyh Ou
, Professor, Department of Accounting and Information Technology, National Chung Cheng
University
Tsui-Chin Lee
, Master, Department of Accounting and Information Technology, National Chung Cheng
University
Chia-Ching Cho
, Assistant Professor, Department of Accounting and Information Technology, National
Chung Cheng University
Huey-Meei Lin
, Adjunct Assistant Professor, Department of Accounting, Feng Chia University