1
CASE 8.1 TELCO CORPORATION
1. How should Telco approach segmenting its customers? That is, on what basis (cost to service, profitability, etc) should the customers be segmented?
The Pretax profits were falling even though revenues were growing. The logistics budget is exceeding to provide the outstanding service for customers, and sales is constantly promising expedited delivery or special production runs for customers who generate very little revenue. 33% of all the customer's account for 71% of the operating profits. Another 27%account for approximately $100 million in losses.
As mentioned above, Telco should segment customers by profitability to improve profitability of customers on a segment by segment basis.
2. How should Telco tailor its service offerings to each customer segment?
Identify the product/service package for each customer segment. To offer the same product/service offering to each customer segment, while varying the product quality or service level. Telco can segment customers into 3 groups. The 33% of all the customers which account for 71% of profits will be high group who are the most valued customers. The 40 of customers that are not most profitable or the least profitable is medium group. and last the 27% of customers that are least profitable is low group.
3. Should certain customers be asked to take their business elsewhere?
4. How should the revised service packages to each segment be introduced to that segment? By the sales force? should all segments be done at the same time?
5. Each division has its own sales force, manufacturing facilities, and logistics network. As such, Common customers (those who buy from more than one division) place separate orders with each division, receive multiple shipments, and receive multiply invoices. Would it make sense for Telco to organize around customer rather than around product? If so, how would this be done? What would the new organizational metrics look like?
1. How should Telco approach segmenting its customers? That is, on what basis (cost to service, profitability, etc) should the customers be segmented?
The Pretax profits were falling even though revenues were growing. The logistics budget is exceeding to provide the outstanding service for customers, and sales is constantly promising expedited delivery or special production runs for customers who generate very little revenue. 33% of all the customer's account for 71% of the operating profits. Another 27%account for approximately $100 million in losses.
As mentioned above, Telco should segment customers by profitability to improve profitability of customers on a segment by segment basis.
2. How should Telco tailor its service offerings to each customer segment?
Identify the product/service package for each customer segment. To offer the same product/service offering to each customer segment, while varying the product quality or service level. Telco can segment customers into 3 groups. The 33% of all the customers which account for 71% of profits will be high group who are the most valued customers. The 40 of customers that are not most profitable or the least profitable is medium group. and last the 27% of customers that are least profitable is low group.
3. Should certain customers be asked to take their business elsewhere?
4. How should the revised service packages to each segment be introduced to that segment? By the sales force? should all segments be done at the same time?
5. Each division has its own sales force, manufacturing facilities, and logistics network. As such, Common customers (those who buy from more than one division) place separate orders with each division, receive multiple shipments, and receive multiply invoices. Would it make sense for Telco to organize around customer rather than around product? If so, how would this be done? What would the new organizational metrics look like?