Topic 6_Managing Customers 6-per-slide

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1 Click to add text to title page ACCT3583 – Management Accounting 2 Topic 6 – Managing Customer Value and Relationships Topic 6: Course content overview Resource management Managing Th i t Topic 6 Topic 7 Topic 8 Topic 9 Strategy implementation and resource management 2 ACCT3583 Management Accounting 2 Managing customer value and relationships supplier relationships and strategic outsourcing Managing knowledge as a strategic resource The environment and engaging in corporate social responsibility Managing strategic risks Management Controls Topic 10 Topic 11 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 3 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. 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) 4 “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 A Lighter Take on CRM customers he would have built a better horse & buggy. Economists, p. 71, October 2009 Measuring Customers 6
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2 1. buy profitable products higher gross margin cost of goods sold (COGS) is calculated using ABC (refer to MA1) What is Meant by Profitable Customers? 2. have low “cost to serve”. focus on selling, general & administrative activities costs of activities to serve customers are calculated using ABC. 7 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” customer or customer group (aka customer costs) (1) COGS + (2) customer-driven costs Both calculated using ABC 8 Steps in Conducting Activity Based CPA 1. Calculate gross margin for each customer group less discounts or allowances 2 Calculate custome driven cost (“cost to 2. customer driven costs (cos t to serve”) for each customer group 3. Calculate net profit for each customer group (% profit) 9 Cost Elements (RESOURCES) Direct Costs Indirect Costs
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