Telco - Case Study

            
             Telco's primary issue is that their pretax profits were falling although revenues were growing. There was also a logistics inefficiency. Telco was exceeding their logistics budget to provide great customer service for customers who didn't necessarily deserve it. .
             1. How should Telco approach segmenting its customers? That is, on what basis cost to service, profitability, etc.) should the customers be segmented?.
             Because Telco said that 33% of their customers make up 71% of their profits, and another 27% make up $100 million in losses, I think they should definitely segment by profitability. By running a profit and loss analysis, Telco will be able to consider which customers are bringing in profit to one division and losses in another. .
             2. How should Telco tailor its service offerings to each customer segment?.
             Telco can have three different value segments; low, medium, and high. Customers will be ranked based on the amount of profit they bring in. They will offer the same products and services to all customers, but those that generate more profit may get better treatment. Many other companies have already started doing this. For example, most airlines offer some sort of reward program for those customers that travel frequently. They may be given free upgrades and other perks that come along with using their services more than others. .
             3. Should certain customers be asked to take their business elsewhere?.
             I do not think that it would be unreasonable to ask certain low value customers to take their business elsewhere. The profitability numbers would be very helpful in deciding which customers to essentially "fire." Not only do certain customers not bring any profit for the company, but they also take up valuable time and customer service efforts that could be used on more profitable customers. Once firing low value customers, Telco can focus more attention on the high-quality, high-value customers.