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Finance Director has observed that 80% of profit comes from 20% of customer and has told sales team not to waste time on them, rather FS does a sampling of 100 customer and told sales team not to entertain bottom 25% of customer (select Three that FD should consider before implementing)
1. It is ethically wrong to stop supplying unprofitable customers
2. It will ignore many customer attributable costs that differ widely from customer to customer
3.This would not consider the total contribution from the combination of product which the customer buys
4.This would not consider the future potential of the customer
5.This Does not take into the account the value of the customer in referring to usPlease state the model answer.
1 It is perfectly ehical not supply unprofitable customers.
2 If they have properly analyses the profits arising from each customer to get the 20/80 figure, these costs have already been taken into accout.
3 Again, the total earned fromeach customer should be in the 20/80 analysis. This is talking about product profitability, not s]customer profitability.
4 Correct.
5 Correct
I can only get two, not three.
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