Cup corp
Management Control System Case Assignment
Name : Muhammad Kamil
12/341277/PEK/17366
Class : International Class, Batch 60
Chapter 11
Case 11-3. CUP Corporation
Case Overview
CUP was one of the largest insurance firms based in Europe. They enjoyed growth rate of more than 25% each year for almost past 10 years. They sold various forms of insurance in order to broaden the type of the insurance into health, life, casualty, property, and automotive areas. However, the growth was flat instead of the planned 3 percent by 1996 and 1997.
The declining growth rate resulted from several issues, economic climate, higher taxes and social welfare levies, increasing competition, extensive satisfaction of the basic demand for insurance in Germany. In 1996, the number of customer canceling contracts compared to the total amount of contracts, called “lapse rate”, reached DM 900M which is 10% of total premium revenue. They are having customer loyalty problem that has to be solved.
One of the issue here is the establishment of CCC (Customer Care Center). This CCC enables the company to provide customer with one telephone number that will answer all of customer questions due to their contract. They need to professionally train people who could effectively answer a variety of questions and increase the service dramatically. The final objective would be to reduce the lapse rate.
The “lapse rate” problem for CUP was summarized by the image of leaking bucket, new customers would flow into the bucket while at the same time many leaked out through big holes. Instead of focusing on the “lapse rate”, the problem was restated as a customer loyalty problem that cut across product lines and was considered a corporate problem.
Analysis and Discussion
CUP decided to create a Customer Care Center to stem defection of customers resulting in part from dissatisfaction with the firm’s service. The working hour of CCC is 24 hours a day and 7 days per week. CCC’s main idea was to provide private
Name : Muhammad Kamil
12/341277/PEK/17366
Class : International Class, Batch 60
Chapter 11
Case 11-3. CUP Corporation
Case Overview
CUP was one of the largest insurance firms based in Europe. They enjoyed growth rate of more than 25% each year for almost past 10 years. They sold various forms of insurance in order to broaden the type of the insurance into health, life, casualty, property, and automotive areas. However, the growth was flat instead of the planned 3 percent by 1996 and 1997.
The declining growth rate resulted from several issues, economic climate, higher taxes and social welfare levies, increasing competition, extensive satisfaction of the basic demand for insurance in Germany. In 1996, the number of customer canceling contracts compared to the total amount of contracts, called “lapse rate”, reached DM 900M which is 10% of total premium revenue. They are having customer loyalty problem that has to be solved.
One of the issue here is the establishment of CCC (Customer Care Center). This CCC enables the company to provide customer with one telephone number that will answer all of customer questions due to their contract. They need to professionally train people who could effectively answer a variety of questions and increase the service dramatically. The final objective would be to reduce the lapse rate.
The “lapse rate” problem for CUP was summarized by the image of leaking bucket, new customers would flow into the bucket while at the same time many leaked out through big holes. Instead of focusing on the “lapse rate”, the problem was restated as a customer loyalty problem that cut across product lines and was considered a corporate problem.
Analysis and Discussion
CUP decided to create a Customer Care Center to stem defection of customers resulting in part from dissatisfaction with the firm’s service. The working hour of CCC is 24 hours a day and 7 days per week. CCC’s main idea was to provide private