Customer Profitability: Why CP Matters More Than You Think

One of the most overlooked yet powerful concepts in business isn’t flashy marketing or rapid growth – it’s customer profitability (CP). And understanding it could be the difference between building a thriving business and one that quietly bleeds resources.

Oxygen8 Business Consultant Peter Ranyard explains why this hidden metric deserves every SME owner’s attention.

What Is Customer Profitability?

Customer Profitability (CP) measures how much margin a customer actually delivers once you subtract the cost of serving them.

Example:

You sell a $10 product to two different customers:

One requires constant follow-ups and customisations, costing $8 to serve
The other is low-touch and efficient, costing only $3

Both bring in the same revenue, but only one is genuinely profitable.

Why CP Beats Revenue for Smarter Business Decisions

Chasing top-line sales without evaluating real servicing costs leads to:

Retaining unprofitable customers
Overcommitting to low-margin accounts
Unsustainable discounting or support

By calculating CP, you can make sharper decisions about:

Who to retain
Who to upsell
Who to let go

The Power of Pairing CP with LTV

Customer Lifetime Value (LTV) estimates the total profit a customer brings across their relationship with your business.

When paired with CP, this insight allows you to:

Focus on high-value, long-term relationships
Cut back on time-wasting, low-margin accounts
Rethink discounting, packaging, and support

Together, CP and LTV reveal which customers are truly worth your time.

Client Story: Northcity Caravans

“We were thinking about selling. Now, with systems and support, we’re thriving – and even won a business award. It’s been a game-changer.”
– Northcity Caravans

When Peter and Wendy took over Northcity Caravans, they were overwhelmed. Outdated systems and lack of structure meant daily stress and low efficiency. Oxygen8 stepped in with tailored coaching, operational planning, and smarter cost control.

The result? A business that runs smoothly, earns more, and has even won awards – thanks to a clearer understanding of profitability and improved decision-making.

Final Thoughts

Not all customers are good customers. By understanding CP and LTV, you stop guessing and start making strategic decisions that protect your time – and grow your profits.

If you’re ready to evaluate your customer base and boost profitability, Oxygen8 can help.

Meet the consultant: Mike Gilbert

Mike Gilbert is a sales and performance champion. A leading performer with an extensive track record of awards and success in both his own SME and the corporate world, Mike has been through the highs and lows of business ownership and understands the pressures and responsibilities that come with it.

Now part of the Oxygen8 team, Mike helps Waikato-based businesses improve results through focused business coaching, performance systems, and hands-on commercial insight.