5471-1-12Q

AID: 1150 | 07/11/2012

Profitability of company across the 11 segments, broken down by deciles. It starts with most profitable segment 10% of household and ends with least profitable segments 10%. In all eleven segments, tenth decile was not profitable, even before taking in to consideration of any allocation of marketing expenses, intended for at new customer acquisitions. The wide range of profitability across segment and decile is given in exhibit. In year 1999 total aggregated loss on all unprofitable segments was $248 million which was the major concern for the management of AIMS.

At a casual level of analysis, some responses are suggested for unprofitable segments. As unprofitable household are customers on whom company are losing money, so to firm them is a one idea. Do nothing, as there is typically a number of compensating business reason for keeping them. It is called the loss leader concept. It is quite possible to make a list containing a number of reasons to pick to keep any presently unprofitable household.

At a deeper level of household, some responses are suggested for unprofitable segments. It suggests unprofitable segment can be turned out in profitable segments. There are some ways to convent these segments in to profitable. To increase the price. To substitute less expensive for much expensive services. To reduce the cost of delivering some services.

Following potential account profitability enhancement programs should be developed. $15 per rep-assisted call should be charged, over 50 calls per year(22,000, 10th Decile Households generate more than 50 calls/year) $.02 per quote should be charged over 100 per transaction. On Brokerage assets or mutual fund, minimum annual fees should be charged of $200 or 20 BP, whichever is greater. For customer generating < $560, revenue per year, limit access to branches and customer representative: -$100 should be charged for branch consultations For automated calls over 300 per year, $.75 should be charged. For on line visits over 10 per transactions $1.25 should be charged. A minimum balance should be set for all new accounts of $50,000 of assets investment for 35 years old, and $75,000 of assets investment of persons having age more than 45 years old.

Conclusion: Company is working on excess capacity. Therefore, cost is increasing. Company should reduce it excess capacity. There also some unprofitable segment which should be eliminated by the company. Company should also consider the both revenue enhancement proposal and service containment proposal.