There were four groups of most unprofitable customers in 1999, as presented in Exhibit 3 of the case study. These were young professionals with 82% unprofitable households, boomers with 59% unprofitable households, others with 56% unprofitable households and retirees with less than one $100,000 in assets with 55% unprofitable households. Least unprofitable were retirees with assets above $100,000 with 9% unprofitable households.
Changes occurred since 1999. Exhibit 3 shows that in 1999, the wealthiest customers were not the worst performing. In 2000, wealthiest customers were among the worst performing customers. Retirees remained the best performing customers in the tenth decile for both periods.
However, the solution to unprofitable customers might be retention. Unprofitable customers can be turned into profitable once some of the services available to them are either eliminated or a fee is charged. Once turned profitable, in the long run they can increase company’s profits. If customer retention is high and acquisition is done wisely so that no new unprofitable customers are attracted and retained, the company can increase the number of customers, as well as their profits.
AIMS is one of the larger services providing companies in the USA. In 2000 they had 3.9 million customers and over $500 billion in assets (AIMS, p.1). They span two different product lines: mutual funds and full – line brokerage services. They have three different distribution channels and different types of customers based on age, activity and wealth.
There are six main types of customers. Six main types are retirees, active traders, wealthy customers with over $2 million in assets, then less wealthy customers with assets ranging from $500,000 to $2 million, boomers and young professionals. Largest group are the boomers, with 1.8 million customers (AIMS, ...Show more