Student-Seminar%206-6perpage

Student-Seminar%206-6perpage - External environment...

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1 Managing Customer Value and Relationships External environment Internal environment Strategy analysis & formulation Performance Measurement Are we creating Shareholder Value? You are here! Customers Seminar 6 Suppliers Seminar 7 Employees/IC Seminar 8 Strategic Risk Management & Control Seminars 10 & 11 Environment/Society Seminar 9 2 Required Readings In the supplementary materials: Reading 6.1 [Kaplan & Narayanan, 2001] Reading 6.2 [Langfield-Smith, Thorne, & Hilton, 2006] Reading 6.3 [Kaplan & Anderson, 2007] A replacement for Reading 6.3 is an article by Mittal, Sarkess, & Murshed, 2008. Please check Blackboard. 3 4 Learning Objectives By the end of this seminar you should… 1. Understand and be able to explain the two definitions of customer relationship management (CRM); 2. Understand and be able to explain the link between customer profitability analysis (CPA) and CRM; 3. Understand and be able to identify the two components of customer profitability and calculate CPA using the activity-based costing approach (measuring customers); 4. Understand and be able to interpret the CPA results (understanding customers); 5. Understand and be able to use CPA and non-CPA information to manage customers (managing customers); 6. Understand and be able to explain the strengths and limitations of CPA; and 7. Understand and be able to explain how life-time value (LTV) analysis complements CPA. 5 Customer Relationship Management (CRM) “A company -wide business strategy designed to optimize profitability , revenue and customer satisfaction by focusing on highly defined and precise customer groups” (Hanson et al., 2008, p.660) “The collecting and analysing of data to understand customers’ behaviour patterns and needs, and to develop strong relationships with customers” (Langfield-Smith, Thorne & Hilton, 2009, p. 754) Customer-relationship management is all about learning about and from your clients. But Henry Ford pointed out that if he had listened to his customers he would have built a better horse & buggy. Economists, p. 71, October 2009 A Lighter Take on CRM
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2 Q1: Increasing customer satisfaction will increase the profitability of a firm. Discuss. 7 Not all customers are equal! 8 Measuring Customers 9 1. buy profitable products higher gross margin cost of goods sold (COGS) is calculated using ABC (refer to MA1) 2. have low “cost to serve”. focus on selling, general & administrative activities costs of activities to serve customers are calculated using ABC. What is Meant by Profitable Customers? 10 Customer Profitability Analysis (CPA) “A comparison of the costs of all the activities used to support a customer or a customer group with the revenue generated by that customer or customer group” 11 Steps in Conducting Activity-Based CPA 1. Calculate gross margin for each customer group less discounts or allowances 2. Calculate customer-driven costs (“cost to serve ”) for each customer group 3. Calculate net profit for each customer group (% profit) 12
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3 13 Cost Elements (RESOURCES) Direct Costs Indirect Costs Traced to cost object
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This note was uploaded on 09/14/2011 for the course ACCT 1001 taught by Professor John during the Spring '11 term at Renmin University of China.

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Student-Seminar%206-6perpage - External environment...

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