Measuring and Managing Customer Relationships Essay

Some companies have elevatedly advanced analytic systems that allow them to estimate these parameters based on the demographic characteristics of a potential or newly-acquired node. The analytics help guide the companies promotion strategies and campaigns to attract customers with the highest anticipate lifetime value. For example, RBC Financial Group in Canada uses an analytic personate of a customers future increaseability based on age, tenure with the bank, number of products and services already used at the bank, and the customers potential to purchase additional products and services, grow account balances, and retort fee-based income.1 The bank assigns a personal account representative to its estimated high lifetime value customers, ensures that their phone calls get picked up quickly, and provides them with ready entryway to credit at attractive terms. 6-31The net promoter score is probably to have the greatest prognostic power for repeat purchases and growth in busin ess-to-customer settings where customers have frequent interactions with companies.The score is likely to have the least predictive power in business-to-business settings where purchasing decisions are made by extremely sophisticated professionals. In this case, it is better to ask, How likely is it that you will continue to purchases products or services from Company X? CASES 6-32The responses below are based on Survival Strategies After Cost Cutting, Companies Turn Toward Price Increases, by herds grass Aeppel, The Wall Street Journal (September 18, 2002, p. A1).(a)Jergens president based the legal injury on what he determined to be the apostrophize of producing the order of 10 odd-sized fasteners from scratch. The speak to included setup for the odd size and overtime labor. The gild really produced the odd-sized fasteners by producing full-size fasteners and then shortening 10. This method was less high-priced than setting up the equipment to run a small batch of the ne cessitate odd size. (b)Goodyear had been rewarding its sales force based on volume, providing an inducement for the sales force to deeply discount prices to large distributors.The discounts were so pregnant that the large distributors could resell the tires to smaller distributors (even with transportation be to other regions), cut down Goodyears sales at higher prices to smaller distributors. Goodyear responded by biting the discounts to large distributors, removing discount approval authority from the sales force and transferring it to a tactical pricing group that determines whether Goodyear can profitably match a competitors prices. Goodyear also modified its sales force fillip scheme to include a revenue per tire metric.(c)Emerson discovered that customers were ordain to pay about 20% more than Emersons initially proposed cost-based price of $2,650 for a new compact sensor. Emerson priced the sensor at $3,150. Note that the expression does not provide information on how Emerson determined product costs that it used as a basis for its markups. A traditional cost system is more likely to undercost a low-volume or customized product because it allocates manufacturing condescend costs to products based on unit-level drivers.An activity-based costing system more accurately assigns costs based on resource usage. (d)Wildeck, a maker of alloy guard rails, mezzanines and material lifts for factories and warehouses, promoted packages that included installing its products. The installations bring higher profit than parts catalog sales. Wildeck responded to a competitors light-priced storage-rack protector by developing its own lite version and pricing it much lower than the competitors price.When customers called about purchasing the lite version, they were informed of the benefits of the superior version, and most of these customers bought the original version. An accurate costing system, such as a good activity-based costing system that includes both m anufacturing and nonmanufacturing costs of providing goods and services to customers, provides sensibly precise information to managers for making decisions about the mix of products and services to tenderise to customers and prices to charge in order to generate the desired level of profitability.(e)Union pacific introduced a minimum price that was higher than a third of its customers paid. The company was not concerned if it lost these customers because customers who were paying higher prices would fill up the newly free space. Dropping unprofitable customers will not subscribe to to an immediate increase in profit if the associated capacity-related costs are connected costs and the resources cannot be put to other profitable use.