Today, forward thinking retail energy executives are realizing that beyond managing a portfolio of products, they need to manage a portfolio of customers. They are taking the concept of measuring profit and loss by product, by brand and even by channel, one step further. Understanding the profit contribution of each and every customer and where exactly profits originate in a customer-centric world is vital for an energy retailer's prosperity and in some cases survival. It is with this in mind that Customer Profitability Analysis (CPA) is emerging as a strategic tool that has the potential to transform the way energy retailers think about their profitability, cost structures, customers and business processes. CPA is the application of specialized analytical models and sophisticated software technology to customer and cost operational data in order to identify profitable and unprofitable customers.
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