Customer Profitability Analysis Reports for Resource Allocation: The Role of Complex Marketing Environments
Eddy Cardinaels (),
Filip Roodhooft and
Abacus, 2004, vol. 40, issue 2, 238-258
Most decision making research in management accounting remains focused on cost information in a production context. Little is known on the relevance of customer profifitability analysis (CuPA) reports, which more accurately reflect revenue and marketing support variations acrosscustomers, 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.
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