Marry Ann F.

Estrella October 10, 2021

BSTM 2-A

Charles Lamb and Sons – Analyzing Customer Profitability

A Case Analysis (TM 2B Risk Management)

QUESTIONS:

1. Is this customer profitable? What steps might make this account more
profitable?

No, Charles Lamb and Sons are not currently profitable to their customers
because they have a vast consumer target resulting to an unorganized
management and loose focus on the main goal. It is obvious on the companies
marketing controller said allegations that they spend more on the cost of
materials and labor (Cost of goods sold or COGS), the sales cost, packing,
billing, delivery, advertisement, and the inventory holding cost than earning profit.
They gain loss than profit from the consumer or costumers.

2. Develop a method by which the profitability of accounts can be regularly

determined.

Steps that might make the company more profitable:

Modify the operating procedure

You must boost revenue while lowering expenditures. Cross-selling may
improve sales by introducing additional services, goods, or commodities
that complement your present offering.

Increase Visibility and Connectivity

Accreditation, licenses, and corporate certificates may help you stand out
from the crowd. Take care of your online reputation while interacting with
clients and building strategic relationships through social media.

Reduce Management Cost but increasing the volume of sales to the

customer
 To begin with, as we can see, the money earned by this client is much less
than the expenditures that must be incurred in order to serve this
customer. As a result, increasing income improves the probability of this
client being lucrative. Because sales generate money for the company,
increasing sales volume to this customer is essential if you want to make
this profitable. Charles Lamb and Sons’ expenditures for supplying this
client include sales calls, packing and delivery, promotion, inventory
holding, and accounts receivable opportunities, as shown in the Easy
Rider’s account. Although packaging and shipping expenses cannot be
avoided, other costs may be lowered in order to save money and make the
client profitable.

Focusing on forming long term relationship to reduce expenses due to

sales call and advertising
Because the client has been acquired and the firm is now servicing them,
Charles Lamb and Sons should take advantage of this chance to develop
long-term connections with them so that they do not have to contact and
convince them every time a sale is needed. This would minimize the
number of sales calls required. As a result of these long-term relationships,
the firm would no longer need to regularly market its products. Sales calls
and advertising are promotional methods used to obtain consumers;
however, once the consumer has been acquired, these tools should be
discontinued.

Improve the inventory management to keep inventory holding cost

updated
In addition, Charles Lamb and Sons may successfully manage its inventory
by adopting the FIFO (first in, first out) inventory management approach,
which results in lower inventory holding costs. Overall expenses would be
reduced, and the client would be profitable as a result.
Formulate agreed upon terms and conditions for payment and
transactional matters to eliminate cost of accounts receivable in the
future
Finally, account receivable potential means that the firms dealing with
this client are either in dispute or have yet to resolve their differences. As a
consequence, establishing a clear payment and delivery system, as agreed
upon by this client, and defining terms and conditions might decrease this
cost in the future.