Top Market Strategy

5.2 Definition of Profit From Customers

Your heavy users purchase the largest volume of items from your business, but which of your customers generate your highest profit per item? You know from experience that loyal customers are not as price sensitive as disloyal customers. Your loyal customers have inelastic demand, so they will continue buying from your business even when your price increases. In contrast, disloyal customers have elastic demand, so they tend to buy from your competitors when your price increases. Since your loyal customers can generate a higher potential profit per item than your other customers and your heavy users have the highest volume of items, your most profitable customers are your loyal, heavy users.

Profit from customers ...