Customer Research Inc Group 2

Customer Research Inc Group 2 - Transcript

Marketing of Services
Arthur Rodriguez Olivier Lambin Rachit Luthra Richa Chopra Nikhil Dhaka Nishant Puri

Acquaintance with the Case

Issues and Important Aspects of the Case The Market Research Industry Organizational Structure Demonstrative tools Profitability Analysis Recommendations Repercussions Customer Value Concepts

Judith Corson Jeff Pope Norma Friedrichs

Co Owners since Inception

Diane Kokal Vice President Jan Elsesser Vice

President

DESCRIPTION
CUSTOM RESEARCH Inc a market research firm based out of Minnesota Custom Research is considering terminating service to many clients to eliminate unprofitable work It aims at concentrating on the more profitable client projects The management faces various issues regarding the sustainable profits of the firm which are
discussed herein

Profitability as a percentage of Sales has been declining Revenue Growth had been a flat curve The majority of the clients with whom they did their

projects though profitable where small in terms of revenue margins Hence could not add up considerably to form a large total Revenue Two third of the clients are in the low low segment which means that in spite of the voluminous bulk of work they bring the profit margins are still below 20 of the total industry benchmark Organizational Structure mismatch and requires a major focus

Capacity planning Customer service Market research Pricing strategy

Customer relations

Profitability analysis

At CRI s creation 70 s
Fragmented market Only small independent firms

Actually 90 s

Consolidation few large firms Biggies

A thousands of small firms dedicated to data

collection tabulation From 1980 to 1987 75 of companies think their research spendings will grow


Completing University

Pillsbury Company

Pillsbury Company

Pillsbury Company

Internal Marketing Research Department

Internal External Marketing Research Department

Outside Marketing Research Department

CRI Founded in 1974

CONSEQUENCES
Central telephone capability under exploited 1 client Not profitable Success of the strategy 20 profit margin Increase of the client portfolio Become an outside research group

Pillsbury asks for corporate taxes Conflict of interests Burger King acquisition VS Mc Donald s contract OMRD chief leaves Pillsbury with two colleagues and creates CRI

TIME

The present organizational structure

constitutes 3 divisions

BtoB and Medical companies 25 of turnover Consumer research 75 of turnover Corporate services support activity

Each employee dedicated for a project from

A to Z

1 Client prospection 2 Study design 3 Proposal 4 Data collection 5 Tabulation 6 Tabulation analysis 7 Report

Project Manager And Staff
Corporate services
Project Manager And Staff

65 101 projects of customers bring LESS than 20k to margin

contribution and LESS than 20 of profit margin 7 11 projects of customers bring MORE than 20k to margin contribution But LESS than 20 of profit margin

72 of customers bring less than 20 of profit margin and reduces considerably the entire profitability of CRI
22 35 projects of customers bring LESS than 20k to margin

contribution But MORE than 20 of profit margin 6 10 projects of customers bring MORE than 20k to margin contribution and MORE than 20 of profit margin Only 28 of customers bring more than 20 of margin

In businesses where the customers can change size

quickly it can be very dangerous to ignore the little guy because they will find other solutions and when they grow up to be large customers you ll be out of the running for their business Customers that are not currently high value may still have high potential for growth Telling these customers apart from those who will never grow in value represents a significant analytical challenge Unless marketers can distinguish high potential customers from ones who will always be low value companies will waste resources trying to develop customers who will never grow

Effective Retention means retaining the right customers not

LTV purchase size x frequency x duration

every customer Managers need to focus their retention actions on customers with the highest Lifetime Value

Accurately analyzing lifetime value helps managers take the

long view giving equal weight to customers who are already doing a high volume of business and those whose purchases are modest but whose actions indicate loyalty and profitability over time Spending precious resources to retain marginally profitable or unprofitable customers actually hurts the overall value of the customer base especially if these retention efforts succeed Having identified the customers worth keeping managers must ensure that their retention strategies maintain value not erode it

Using Structured implementation methodology and portfolio of technologies the questions that can be answered are
Which clients are most profitable

What attributes they share in order to

focus investments and sales efforts

Client Profitability Analysis Model for analyzing

profitability and executing across meaningful sample

Attributes Analysis Analysis of the attributes of

the most profitable relationships

Yield Management This technique helps a lot

in CAPACITY PLANNING

Bad name in the industry

Less retention could also lead to decrease profit

margins given amount of low low quadrant Issues arising out of further acquisition


LTV of customer including referral Future aspects Profitability

Criteria for Termination

Reduction in overall customer base

Reduction in frequency and volume of projects Fall in contribution of currently profitable

quadrants Hence further fall in overall operating margins Low acquisition rate

They should not part away with the small clients

because they themselves are not big in the industry Retain all major loyal customers Understand and carry out a COST BENIFIT ANALYSIS for various project Outsource less important projects to small agencies and deal based on profit sharing Change pricing strategy for unprofitable clients and don t offer them any discounts

Organizational Structure
Sales function in a research industry require different

skills Like detailed knowledge of project as well as tech of project Project manager would have to play the part for bigger projects and clients Aim of our strategy is to eliminate very few clients