Case: https://www.scribd.com/document/367123931/American-Investment-Management-A
ID: 2601656 • Letter: C
Question
Case: https://www.scribd.com/document/367123931/American-Investment-Management-Aims-Sank
1) Which are the potential sources of “hidden profitability” that you detect for AIMS? 2) What are your overall recommendations to top management based on the customer profitability analysis? 3) Why is the firm facing this situation? How can this be prevented towards the future? 4) What is your opinion of the process the firm followed to assess the customer profitability? How would you use this information to improve your business?
Explanation / Answer
1. The potential sources of hidden profitability are from call centres, full service branches and E-Business. The main source of profitability is from mutual funds and full-line brokerages.
2. Change the unprofitable household to profitable by either
a) Raising Prices
b) Substituting less expensive for more expensive services.
c)Reducing the cost of delivering some or all services
and by following any of the potential account profitability enhancement programs.
Like charging $15 per rep-assisted call, over 50 calls per year and charging $ 0.02 per quote over 100 per transaction (or)
Charge a minimal annual fee on brokerage assets (or)
For customers who generate less than $560. Revenue per year average limit access to branches and customer representatives:
------charge $100 for branch consultants
-------routing all incoming calls to automated answering service, by passing account representatives.
3. The firm is facing the issue because AIMS has only 40% of the invested assets of its customers and rest 60% are invested elsewhere. To prevent this in future the company has to invest more than 40% of its customers assets.
4. The Firm has used the process of dividing all customers into segments and further to deciles and according to me it is best one for choosing the unprofitable customers and taking correct decisions on them to make them profitability it has helpful very much in taking profitability decisions by identifying where exactly the unprofitable customers and thereafter finding reasons for unprofitability and taking actions to turn into profitability. According to my opinion the strategy is best.
I will be using this methodology for grouping all customers and take corrective actions on them to turn unprofitability ones into profitability by finding the reasons and taking corrective actions.