0401

Problem

A marketing research company found that 6 percent of its clients generated 30 percent of sales and nearly all of its profits. At the other end of the continuum, 70 percent of its clients provided annual billings (revenue) that were below break-even levels, because these customers required an extensive amount of service from research employees. The company took immediate action to terminate relationships with clients who would not give them a higher share of their marketing research expenditures. Evaluate this decision and suggest a set of criteria that the firm might use to screen new clients.

Step-by-step solution

Show all steps

100% (2 ratings) for this solution

Step 1/1

A market research company perceived that it is unable to extract even break-even level of costs from 70 percent of its total clients. Therefore, the company took immediate action to terminate relationships with these 70 percent of clients completely.

Decision evolution:

• It is very cognizable and wise decision to terminate the relationships with these clients.

• It helps in holding the losses.

• It provides vent for the company to screen new clients and there by assists in accumulating profits.

Below is the given set of criteria that the firm might used to screen new clients:

Criteria to screen new clients:

• The profit opportunities are analyzed and measured before adopting a client to the business.

• To determine the expected technical and economical benefits of a client and ensure of ability to fulfill the same.

• To analyze and compute the long term benefits that could be extracted from a client.