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Questions and Answers
Which tools are used to classify customers? (Select all that apply)
Which tools are used to classify customers? (Select all that apply)
- ABC classification (Pareto's Law) (correct)
- Customer profitability analysis (correct)
- Balanced investment strategy
- Customer loyalty program
- None of the above
- Only A and B
Which of the following are steps in ABC classification (i.e., applying Pareto's Law)? (Select all that apply)
Which of the following are steps in ABC classification (i.e., applying Pareto's Law)? (Select all that apply)
- Both A and C
- Modify classifications based on strategic issues (correct)
- Restructure companies based on size
- Provide stewardship for each customer
- Classify companies by sales (correct)
Which of the following is a key tool for performing customer profitability analysis?
Which of the following is a key tool for performing customer profitability analysis?
- Automatic data processing
- Activity-based costing (correct)
- Return on investment
- Economic order quantity
- After receipt of order
What does Activity-based Costing do for organizations? (Select all that apply)
What does Activity-based Costing do for organizations? (Select all that apply)
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Once a company knows that a customer is no longer profitable, which of the following are appropriate options? (Select all that apply)
Once a company knows that a customer is no longer profitable, which of the following are appropriate options? (Select all that apply)
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Study Notes
Customer Segmentation Techniques
- Segmentation classifies customers based on their significance, utilizing tools such as:
- ABC classification (Pareto's Law)
- Customer profitability analysis
ABC Classification Steps
- Essential steps in ABC classification include:
- Classifying companies by sales
- Modifying classifications according to strategic issues
Customer Profitability Analysis Tool
- Activity-based costing is a vital tool for conducting customer profitability analysis, providing detailed insights into costs associated with services.
Benefits of Activity-based Costing
- Activity-based costing offers organizations:
- An accurate view of service costs
- The ability to create individual customer profit and loss (P&L) statements
Options for Unprofitable Customers
- When identifying an unprofitable customer, companies may consider:
- Collaborating to lower service costs
- Raising prices
- "Firing" the customer from their portfolio
- Maintaining the current situation is typically not advised in these circumstances.
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