Profitability Analysis and Commercial Strategy in Liquified Petroleum Gas Distribution

Abstract

Companies have realized that certain customers, despite consuming on a large scale, are not profitable and demand great service efforts. Adopting methods that make it possible to differentiate customers according to their share of the company’s results contributes to improving the management process. The present study aims to present the use of the Cost of Serving (CTS) methodology in the analysis of customer profitability and its use as a commercial strategy tool, demonstrating how we can apply it in a consumer portfolio of a Liquefied Petroleum Gas distributor (LPG) in the state of Rio de Janeiro. The work discusses how to calculate the CTS of each client, adopting concepts derived from the activity costing method and its impact on the contribution margin. Criteria for customer segmentation are discussed, and all these concepts support managerial decisions considering the market forces present in the sector it operates. The literature review supports the empirical study and is based on data obtained from the LPG company. The CTS analysis seeks to improve management efficiency, reduce costs and increase the company’s profitability. The conclusions offer an instrument for the management of the company’s portfolio and address logistical, commercial, financial and competitive aspects that affect the LPG distribution market.