MEASURING CUSTOMER PROFITABILITY WITH ACTIVITY-BASED
            COSTING AND BALANCED SCORECARD


                       Ildikó Réka Cardoş, Babeș-Bolyai University, Romania
                      Vasile Daniel Cardoş, Babeș-Bolyai University, Romania


ABSTRACT: In the last years many organizations realized that each customer is different; market
orientation is essential to their success and the secret to improve profitability is to measure and
manage customer profitability. Identifying and separating the most profitable customers from the less
profitable ones; reducing the erosion of profit by customers; focusing on long-term customer
profitability are only a few of those objectives that provides routes to a clear strategy for profitable
growth. Although customer profitability analysis is considered to be a marketing topic it is considered
as an important managerial accounting innovation in the same time and represents attractive
research topic because of its novelty and exploding growth. Having in mind these aspects the
remainder of this paper is structured as follows: first the background of managerial accounting is
established by presenting the four evolution stages of managerial accounting. We would like to point
out that the new challenge of managerial accounting is customer orientation and customer
profitability analysis. Second, based on the existing literature in the field, we focus on the conceptual
framework of customer profitability analysis. Third, we focus on the managerial accounting tools
associated with customer profitability analysis. We would like to emphasize that combining customer
profitability analysis with an activity-based costing system and balanced scorecard organizations
can measure customer profitability accurately, gaining valuable information that enables companies
to transform unprofitable relationships into profitable ones. Finally, conclusions are drawn in order
to establish future research objectives.

Keywords: managerial accounting, customer profitability, balanced scorecard

JEL Code: M41