ACC640 Week 4 Discussion Forum 1 Analyzing Customers

1.      Explain the value of a customer-profitability analysis in making management decisions about future operations.

An individual or organization can determine customers that are in the profitable bracket through customer profitability since the analysis helps in such a categorization. The customer-profitability analysis also helps improve customer satisfaction, value share, and market share. Organizations determine the costs of retaining or acquiring a client through customer profitability. In addition, companies can create strategies suitable for their business from the information they receive from the analysis. Customer-profitability analysis helps a business know which client to hold on to and how to make the less profitable clients into improved clients from the categorization.

2.      Prepare a plan to address potential scenarios of inadequate customer-profitability

When an organization has unprofitable clients, there are several steps one can engage in to either terminate the relationship or make them improve their profitability. In such a scenario where one wants to end the relationship, it would be ideal first to increase relational costs Schwab, 2020). Relational prices are reduced by lowering service quality and having minimal to no advantages. Non-profitable customers, in some cases, are aware of their value and may take advantage of the service discounts, which increases service costs and the charging price decreases leading to unproductivity. The other step is to gently inform the particular client of the situation to make them understand the company’s position as plainly as possible. The company might also offer possible options that would make the clients profitable with a high value attached to it which helps to speak more on importance. Similarly, the company needs to take action to terminate the relationship after considering the steps.

Reference

Schwab, P. N. (2020, May 4). How to manage unprofitable customers in 3 steps. Market research consulting. https://www.intotheminds.com/blog/en/how-to-manage-unprofitable-customers-in-3-steps/