Jack Johnson, owner of Johnson drinks, just received notice that one of his biggest and most loyal customers can negotiate a lower price for its purchase of the product. Information obtained from an accountant Johnson's customer service costs are allocated to customers as a percentage of income, suggests that the return on the client is too small to withstand the lower prices. Students are encouraged to develop activities on the basis of the cost allocation of customer service and use it to assess customer profitability for several clients. Revised costs reflect that the customer places low demands on resources, and customer service is profitable enough to allow Johnson drinks to negotiate the price to keep the business. Additional analysis reveals some unprofitable customers who were previously considered profitable, that offer opportunities to make strategic decisions that lead to improved profits. "Hide
by Luann J. Lynch Source: Darden School of Business 7 pages. Publication Date: 03 February 2009. Prod. #: UV1033-PDF-ENG
