American Investment Management Services Teaching Commentary Assignment

American Investment Management Services Teaching Commentary Assignment Words: 433

American investment management services teaching commentary overview this case deals with customer profitability analysis in the retail investment services business in the year 2000. It is based on a large and well-known firm that prefers to remain anonymous. There are three distinct “Layers” To the case. At the first level, the issue is ABC analysis for selected “Problem customers. ” The case illustrates a simplified version of an ABC system actually installed at the company in 2000.

Students typically are able to handle this level of the analysis relatively easily. At the second level, the issue is customer profitability enhancement through some combination of price increases, cost reductions, and/or changes in resource consumption. Several proposals are suggested in the case. Students typically are comfortable calculating the “what if” implications of various policy options. One key idea often missed, however, is the potential impact of price changes on resource consumption patterns.

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Raising the price of “A,” for example, may lead customers to consume less “A” and more “B,” or less “A” and not more “B. ” At the third level, the case asks students to take the “big picture” perspective and recommend specific actions to management regarding the customer profitability “problem. ” At this level, the case is much broader and richer, and the calculations are much less precise. Questions 1, 2, and 3 deal with level one, Questions 4 and 5 with level two, and Question 6 with level three. answers to Assignment questions

Question 1 | |Overall Average | | |Household | |Revenue | | |MF Fees |320 | |Brokerage Fees 240 | |Total |$560* | |Expenses | | |Branch “Interactions” |$ 171 | |Rep-Assisted calls |$1482 | |Automated calls |$ 153 | |O/L Visits |$ 264 | |O/L Quotes |$ 45 | |”Transactions” |$ 526 | |Acct.

Maintenance |$ 657 | |Acct. Retention & | | |Development |$ 288 | |Total |$355 | |Net Margin before Acquisition and Account Set-up Costs |$205 | *$2. 173 Billion ? 3. 88 million = $560/household. 1 875,000 ? 3,880,000 = . 23 “Interactions” x 74. 51 = $17. 2 54. 2 million calls ? 3. 8 million = 14 calls x $10. 59 = $148. 3 74. 1 million calls ? 3. 88 million = 19. 1 calls x $. 76 = $15. 4 78. 133 million visits ? 3. 88 million = 20. 1 visits x $1. 29 = $26. 5 718. 2 million quotes ? 3. 88 million = 185. 1 quotes x $. 02 = $4. 6 18. 475 million “transactions” ? 3. 88 million = 4. 8 transactions x $10. 83 = $52. 7 10. 3 million accounts ? 3. 88 million = 2. 65 accounts/household x $24. 56 = $65. 8 $560. revenue/household x 5% = $28. Question 2 1) The profit potential from the 389,000 tenth decile-losing customers is huge at $124 million for 1999. 2) In fact, the problem of unprofitable customers goes far beyond just the tenth decile.

Combining the % unprofitable column in Exhibit 3 with the number of households, by segment, on page 3 of the case yields a calculation of 1,950,000 unprofitable customers. This is fully 50% of all customers — WOW! 3) Per case facts, the annual profit impact of these 1,950,000 households is a loss of $248M. 4) The per household magnitude of high profitability and unprofitability (the two tails of the distribution) varies widely across the eleven customer segments, as shown below. | |Per Household Profit and Loss | | | | |# of Unprofitable Households | |Segment |1999 . (000) | | |First Decile |Tenth Decile | | |2M+ |$ 38,900 |$ (2,187) |2 | |. 5-2M |6,850 |(980) |20 | |AT (>200) |16,110 |(1,333) |1 | |(60-200) |7,830 |(1,667) |3 | |(36-60) |3,890 |(1,684) |7 | |Retiree (100-500) |1,730 |(297) |24 | |

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American Investment Management Services Teaching Commentary Assignment. (2018, Oct 13). Retrieved January 25, 2022, from https://anyassignment.com/samples/american-investment-management-services-teaching-commentary-1454/