The Customer Pyramid: Creating and Serving Profitable Customers

Question 1

Customer pyramid

Answer 1

a tool that enables the firm to utilize differences in customer profitability to manage for increased customer profitability.

Question 2

80/20 rule

Answer 2

Twenty percent of customers produce eighty percent of sales or value to the company.

Question 3

4 levels

Answer 3

1. Platinum tier: company’s most profitable customers, heavy product users, not overly price sensitive, willingness to invest and try new offerings, and committed to the firm.
2. Gold tier: profitability levels are not as high because they want price discounts and they are not as loyal to the firm despite being heavy users in the product category.
3. Iron tier: provide the volume needed to utilize the firm’s capacity but whose spending levels, loyalty, and profitability are not substantial enough for special treatment.
4. Lead tier: customers are costing the company money.

Question 4

Turning gold into platinum

Answer 4

1. Become a full-service provider so that customers get everything they want.
2. Provide outsourcing= take on an entire function that a customer firm used to perform for itself and providing it for them.
3. Increase brand impact by line extensions.
4. Create structural bonds by providing services to the client that are frequently designed right into the service delivery system for that client.
5. Offer service guarantees= use methods to find out when service problems occur and then resolve them quickly and completely to avoid dissatisfaction.

Question 5

Turning iron into gold

Answer 5

1. Reduce the customer’s nonmonetary costs of doing business= for instance reducing the hassle and search costs that customers associate with making a purchase
2. Add meaningful brand names= associating product lines in the stores with more favourable brand images than those of the store itself.
3. Become a customer expert through technology= for instance building an information database about customers’ preferences.
4. Become a customer expert by leveraging intermediaries= build reputations and long-term relationships.
5. Develop frequency programs= to encourage customers to spend more with the company in order to receive special benefits.
6. Create strong service recovery programs= a strong program catches all possible service errors and corrects them promptly and appropriately.