Question

1. What managerial insights about profitability per household can you extract from Exhibit 3?
2. a) Using ABC analysis, and the information in Exhibits 2 and 4, calculate the loss per household for the six customer profiles per Exhibit 4. Round your calculations to the nearest dollar. b) What are two specific management actions for each of the six customer profiles that would substantially improve the profitability? Calculate the impact of these actions to the nearest dollar.
3. Noting that excess capacity is charged back to active accounts, if AIMS scaled back to 3,000,000 active households and planned only a 10% excess capacity reserve for future growth, a large proportion of cost could be eliminated. Estimate how much of total cost for 1999 could be eliminated, based on facts presented in the case.
4. What are your overall recommendations to top management based on the customer profitability information?

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1. What managerial insights about profitability per household can you extract from Exhibit 3?

From Exhibit 3, we can see the percentage of households who are unprofitable in the eleven categories of customers as identified by the company. We can see that among the core customers who are 70% of the customers for the company, 82% of the young professionals are unprofitable and 59% of the boomers are unprofitable. Similarly among the Active traders, 36-60 category represent the most unprofitable percentage of households at 36%. Among the retirees the category with less than 100 K represent 55% of the households and the Most of the households in the HNW category are profitable....

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