Customer Profitability Analysis Reports for Resource Allocation: The Role of Complex Marketing Environments

21 Pages Posted: 16 Jun 2004

See all articles by Eddy Cardinaels

Eddy Cardinaels

KU Leuven; Tilburg University - Tilburg University School of Economics and Management

Filip Roodhooft

Katholieke Universiteit Leuven

Luk Warlop

KU Leuven - Faculty of Business and Economics (FEB); BI Norwegian Business School

Abstract

Most decision making research in management accounting remains focused on cost information in a production context. Little is known on the relevance of customer profitability analysis (CuPA) reports, which more accurately reflect revenue and marketing support variations across customers, for marketing decisions. This study uses an experimental design to examine the impact of such reports on resource allocation decisions (that affect the firm's profits) in marketing environments varying in complexity. The main result of the experiment suggests that the value of CuPA reports depends on the complexity of the marketing setting. Only in a highly complex marketing setting do they enhance resource allocation decisions and resultant firm profitability. Conversely, in the simple marketing environment, decision makers can combine their traditional volume-based cost data with other available types of feedback to perform as well as under a more accurate CuPA report. These findings on complexity contrast with those of a prior study in a production context (Gupta and King, 1997). It is argued that improvements in the current research design, in the form of regularly updated profitability reports and concerning accuracy, increase the relevance of CuPA reports in a complex marketing setting.

JEL Classification: M40, M46, M31

Suggested Citation

Cardinaels, Eddy and Roodhooft, Filip and Warlop, Luk, Customer Profitability Analysis Reports for Resource Allocation: The Role of Complex Marketing Environments. Abacus, Vol. 40, No. 2, pp. 238-258, June 2004. Available at SSRN: https://ssrn.com/abstract=554923

Eddy Cardinaels (Contact Author)

KU Leuven ( email )

Naamsestraat 69
Leuven, B-3000
Belgium
+32 16326984 (Phone)

HOME PAGE: http://www.kuleuven.be/wieiswie/nl/person/00013472

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Warandelaan 2
Tilburg, 5000 LE
Netherlands
+31 134668231 (Phone)

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/?uid=e.cardinaels

Filip Roodhooft

Katholieke Universiteit Leuven ( email )

Leuven, B-3000
BELGIUM

Luk Warlop

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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