In: Operations Management
If you are the manager of a large retail bank and you find that some customers are not profitable, how could you manage the divestment process?
Please Give a well explained answer using proper terminology
Managing the divestment process
Firms engage customers when the transactions are mutually beneficial . However it is difficult to maintain for the long term. Disinvestment comes into management’s mind when the value to the customers exceeds the value extracted.
Reassessing the customer relation presently
First of all the executives should review the information beyond the profit, which was used to identify thing the customer or an individual as a problem. The financial metrics such as future spending, current spending.
Sometimes companies find out that they have misjudged the customers and customers who are identified as unwilling to sped and therefore not profitable they may be simply not aware of the range of the services available.
Educate the customers
Fostering relationships with the customers is like managing all their expectations: If the customers will have the information they needed to navigate the complicated service or product situation then they have very few questions and less need to draw the company’s valuable resources. Managers should always be aware of the customer’s knowledge gaps and he should try to fill that gaps. Instead of the disinvestment customers may need to be taught about different products and services usage better. In b2b space, the education of the unprofitable customer is feasible than in consumer space. An educated customer is very less likely to blame the company if the relationship dissolves. Indeed by just changing the relationship information, companies can manage attribution and the consumer responses.
Renegotiating the value proposition
It is an outgrowth or the education and reassessment processes and especially is very attractive in the market where the company offers different price and service strategies for different customers without affecting the relationship with the customers. Renegotiation in the market involves long lead times reviews of the facets of the relationship. Rather than the product alone, some companies offer varying levels of support.
Migration of customers
Some companies actively assist the customer for divestment because for making a transition to a different company, or a partner and sometimes to the competitors itself. By doing this, the businesses not only get rid of the problem but also demonstrate the efforts that can help them mitigate the customer’s reactions that are negative or fears about switching to other service providers.
Terminate the customer relationship
If there is no hope after trying all the methods than the company should end the relationship with the customers.