Developing an Activity-Based Costing Approach to Maximize the Efficiency of Customer Relationship Management Projects

TL;DR

This paper proposes an activity-based costing model integrated with performance measurement to help managers identify profitable customers and optimize business processes for enhanced customer relationship management.

Contribution

It introduces a novel combined approach of activity-based costing and performance measurement specifically tailored for customer relationship management.

Findings

Enhanced understanding of true costs of products and services

Identification of cost drivers affecting profitability

Potential for integrating business processes around profitable customers

Abstract

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 your customers are making you money and which are losing you 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. This approach has the potential to integrate all business processes around the requirements of significant profitable customers, a fact that most of the previous researches fail to acknowledge.