What is the Action-Profit Linkage?

The Action-Profit Linkage (APL) model is used by companies to identify, measure, and understand the causal links between strategy, company actions, product/service improvements, customer behavior and economic impact ( profitability). 

The model seeks to provide managers with an explanation of behavioral linkages so they can then identify and measure key drivers of business success and profit by developing causal links between each. By doing so, they can estimate the impact of actions taken to bring them about. 

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How to Use the Action-Profit Linkage? 

The Action-Profit Linkage model identifies four main components: 

• company actions, 
• delivered product/service, 
• customer actions, and 
• economic impact. 

The behaviors (and perceptions and attitudes) of stakeholders who are affected by a company component can be measured with regard to each component.

Examples of the Action-Profit Linkage?

Management and employee behavior can be measured as activities in the company action component by measuring learning, workload, reward and recognition and culture. 

Product/service characteristics such as price and quality can be measured along with employee or customer perceptions of the product/service. 

Customer behaviors such as purchase rates, share of requirements, repeat purchases, cross-sell rates and new referrals can be measured as well as attitudes such as customer satisfaction and intent to purchase. 

Economic impact (such as customer revenues and profitability, number of new customers, and market share) can be measured.

Related Topics

• Business Performance Measurement
• Benchmarking
• Balanced Scorecard
• Economic Value Added
• Activity-Based Management
• Quality Management
• Action Profit Linkage Model
• Business Activity Monitoring
• Gap Analysis
• Strategy Diamond
• BCG Growth-Share Matrix
• GE McKinsey Matrix
• Value Reporting Framework
• Pyrrhic Victory