THIS CASE DEALS WITH CUSTOMER PROFITABILITY ANALYSIS IN THE RETAIL INVESTMENT SERVICES BUSINESS IN THE YEAR 2000. IT IS BASED ON A LARGE AND WELL-KNOWN FIRM THAT PREFERS TO REMAIN ANONYMOUS. There are three distinct “layers” to the case. At the first level, the issue is ABC analysis for selected “problem customers.” The case illustrates a simplified version of an ABC system actually installed at the company in 2000. Students typically are able to handle this level of the analysis relatively easily. At the second level, the issue is customer profitability enhancement through some combination of price increases, cost reductions, and/or changes in resource consumption. Several proposals are suggested in the case. Students typically are comfortable calculating the “what if” implications of various policy options. One key idea often missed, however, is the potential impact of price changes on resource consumption patterns. Raising the price of “A,” for example, may lead customers to consume less “A” and more “B,” or less “A” and not more “B.” At the third level, the case asks students to take the “big picture” perspective and recommend specific actions to management regarding the customer profitability “problem.” At this level, the case is much broader and richer, and the calculations are much less precise. Questions 1, 2, and 3 deal with level one, Questions 4 and 5 with level two, and Question 6 with level three.
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