e. sales revenue less all product-related expenses for all products sold to an individual customer during one particular period of time .Then, depending on the availability.
of data, sales, general and administrative expenses traceable to the individual customer are subtracted. The result of this calculation is the operating profit generated by the customer. An extension of this line of thinking is the computation of customer return on assets, i.e. customer profitability divided by e.g. the sum of accounts receivable and inventory. Second, customer profitability is also referred to in a future sense in the literature. In this case, it often takes the form of the output from a net present value analysis. The output is sometimes referred to as the lifetime value of a customer. It has been defined, for example, as the stream of expected future profits, net of costs, on a customer's transactions, discounted at some appropriate rate back to its current net present value. A similar concept is customer equity which is seen as a function of the customer's volume of purchases, margin per unit of purchase, and acquisition, development and retention costs traceable to this customer.
2.4. Links between customer satisfaction and customer profitability.
2.4.1. Customer satisfaction and repurchase intentions.
It should be noted that customer satisfaction (a mental state) cannot have any direct.
impact on customer profitability. It is the behavior of the customer, which may follow from a certain level of satisfaction, that affects customer profitability. Consequently, a number of variables which are assumed to be a) consequences of customer satisfaction and b) predictors of profitability have been suggested in the literature. These include loyalty, word-of-mouth, price sensitivity, feedback to the supplier, and job satisfaction among the supplier's personnel. In this study, however, focus is on a particular class of variables related to purchasing patterns.