UEQ
Xavier Institute of Management, XIM University, Bhubaneswar
Customer Relations Management
Term-V: 2021-23
End-Term Question Paper
Marks: 40
Time: 90 minutes
All questions are compulsory
Each Question carries 10 marks
Q No.1 ART Food Ltd (Art Food hereinafter) is a company which has production, sales, and
marketing operations in China and Hong Kong. Art Food has been in the food industry for more
than 20 years with a good credential in making quality products for customers in middle-income
groups. Art Food produces bakery foods (e.g., pizza, bun cakes, pastry), confectionery foods (e.8,
chocolates, sour sweets), and processed foods and meats (e.g., sausage, hams). During recent
years, Art Food expanded to the meat trading businesses including chilled and frozen meat (e-g,
Angus beef, salmon, lamb rack). Ten years ago, the company was acquired by a Swiss food
conglomerate and started to expand production facility in China, while Hong Kong production
gradually faded out. A new brand was introduced along with the original brand but more
concentrated on the mass market. Today, Art Food maintains a small production plant and
packing unit in Hong Kong. Art Food makes its own branded and OEM products for Hong Kong
customers. Its customer segments include supermarkets, department stores, restaurants, and
customers with
hotels. Department stores, hotels, and restaurants used to be Art Food's focused
The strategy for the mass market in
its prestigious brands and high credential in the upmarket.
the traditional wealthy classes (and the upmarket
Hong Kong has shifted the market focus from
operators become the
hotels and catering) to the current mass markets. Today, supermarket
core customers
of Art Food. OEM processed food products are its bread
and butter.
Sales and Operations
Art Food divides customers into
(CAT), department store (DPS),
four sale channels, namely, institutional market (INS), catering
distributors (DTR). Each channel has its uniqueness
and
finally
and mode of operation:
customers with a large sale network or sale points (e.g.,
Institutional market is referred to those
is characterized by large sale volumes, multiple products,
supermarket). This market segment
Competition is high and trade margin is low.
low prices, and longer credit terms (60-120 days).
fond of ordering OEM product (private label) with
Customers from supermarket are particularly
These orders tend to require more work, lower
small modification from their branded products.
branded goods. These customers are not particularly
and would affect its own regular
margin,
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oyal and require Art Food to hold stock on their behalf,
In as much as the above
these customers are normally good in payment and make bulk and regular
Catering market is a user market in which purchased foods are
customers.
restaurants,
disadvantage,
orders.
cooked by chefs for theirultimate
ordinary
clubs, or
It can be classified into two groups. The first group is hotels,
chains
orders. The second group is the fast-food
small but
characterized
frequent
by
customers usually in a large volume order but inexpensive products. For the
first group, chefs are
regular visits and full
the decision makers for sale orders. Responsible sale persons require to pay
attention to them to solicit information and provide added value to reduce their workload (e.8,
trimming fat or bones for the meat). For fast-food chain, the purchase is centralized
at the
procurement office which finds competitive price of ultimate importance. Both groups o
customers know what they want and therefore are very demanding on products and services.
Profit margin for this channel is usually higher than the institutional market. However, business
risk for catering and restaurants operators vary significantly that requires close monitoring
Department stores order not only processed foods or pastry but also confectionery foods such
as chocolates, cakes, or biscuits. Order value tends to be high but also depends on seasonality.
Joint promotion may be required particularly in big festivals such Chinese New Year, Valentine
days, or Christmas. The general trade terms for the market are 1-month good consignment and
60 days' trade credit. The historical records show an average of 2% returned and write-off stock.
In the past, Art Food's own brand had a very high reception in the middle to up market.
Distributor channel (DTR) is referred to food traders who purchase foods product in large volume
and distribute them to small retailers or wet markets. A majority of distributors are not financially
strong which warrants close attention. This business sector has the highest-risk exposure
compared to others. Trading margin is usually low because of high market competition (around
10%). Meat prices fluctuate rigorously, and timing of purchase is of paramount importance.
Profitability information for 50 key customers that represent
90% of sale is shown below in Table
12.1. The remaining 10% is one-time customers sold on cash sale. Gross profit in the report (GP)
or cost of traded
factory
represented the sale revenue net of cost of production
was apportioned based on direct costs or allocated
goods. Cost to serve (CTS) for each customer
from its own
financial charges on working capital.
by transaction activity or time spent customers, including
individual customers. The following expenses are
In fact, not all operating costs are absorbed by
on
for catering businesses but charged to the corporate
level only.
to promote restaurant and catering sales.
Art Food set up a butchery department in Hong Kong
which are made i
the branded and OEM processed meat and sausage products
Apart from
and frozen salmon) with
China, Art Food started to sell imported meat (e.g., beef, lamb, pork,
for the
restaurant chefs. The minimum annual operation costs
trimming specification given from
included two butchers' payroll, rented equipment, and
butchery unit was $O.8 million, which
chilled and frozen storage with a capex of $
other sundry expenses. Art Food installed an extra
2 P a Be
.5 million and annual minimum operation expenses of $200,000. An average of $1 million of
inventory was held to support the businesses.
Questions
(CPMG) and analyze customer
Do
accounts by you from the given list.
profitability of any 5 randomly selected customer
2) and type (column 3) and
identify the customer by serial no. (column 1), name (column
assign them in various clusters of CP.
Customer
(1) Create
2
Performance Management Grid
What action strategy do you recommend for
the chosen customers?
Table 1Customer profitability for top 50 customers
Customer
INS
WM
1,711,834 1,144,067 567,767
JestCo
5,522,046
DPS 3,405,866
Round-the-clock
INS 2,185,660
699,411
448,281 251,130 0.56
LTAircatering
CAT
1,948,600
253,318
58,853
0.30
DPS
248,038
116,578
194,465
75,607
40,971
0.54
INS
1,568,204
501,825
200,587
301,239
.50
201,108
126,084 0.63
214,644 |1.25
0.18
11,990
Mims
Kingsway
10,620,582
INS
DTR 781,846
Good Value
Trading
78,185
C-Sales
Hotel_K
CAT 520,384
Parkview
CAT
278,058
Distributor_Macau | DTR 418,204
DTR 718,618
Gate Gourmet
20
,362,346 363,766
185,808
CAT 502,184
DTR 821,868 98,624
|DTR 1221,856 146,623
Dragon
DPS 421,846
Unit
DTR 618,468
Yong Kee
INS 262,184
CPCS
Total 34,992,432
Notes: INS = Institutions: DPS
=
0.41
2,761,351 1,952,392 808,959
CAT 1,722,058 327,191
INS 1,205,862 385,876
Restaurant O
19
CP/CTS
CP
PN
GOGO
DCH
18
CTS
Type Sale
no.
10
GP
Customer
171,232
66,195
61,116
62,338
70,152
228,969 54,582
50,337
86,198
46,002
39,818
| 86,234
185,612
54,029
89,411
61,847
76,033
51,859
0.50
998,5812.75.
124,692 2.04
36,286
0.58
76,470
1.09
174,387 3.19
0.71
35,861
0.16
6184
32,205
0.60
96,201
9988
1.08
0.19
88,268 12,235 0.14
9,399,865 5,439,610 3,984,727 0.73
Departmental Stores: CAT=Catering: DTR=Distribution
Q No. 2
MAXING Plc. is a DTC company which has a budget for advertising and promotion. MAXING has
identified two media sources: banner ads and direct mail. A web portal has an active subscriber
base of 10 million and offers to sell banner ads at $28,000 per week, while email charges for each
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mal at $50. A behavioral research reports that the click rate for subscribers
on banner ads is
and the purchase rate for those subscribers who click and buy is 1%, whereas
orect email is 19%.
U.5%
the response rdte
Assuming that MAXING has an average margin contribution
of $50 for each
buyer, the retention rate from Internet customers is 80% and from direct mail customer
is 50%.
With a 10% discount rate, (a) what is the acquisition cost for each option; (b) which media
channel should be selected and why?
Q No. 3 Uday, with his first job has moved to the city of Indore recently. He is 26 years old and
loves to explore the outdoors. He is gifted a Renault Kwid by his father. His first car to drive along
and go on road trips to explore natural wonders around the city. Uday is an environmental lover
and prefers to purchase sociallyresponsible products. He is also price conscious and loves to live
within his means. In addition to saving money, shopping for the best price provides joy for him.
He is an independent thinker who wants to be in control of his éhoices. Uday keeps up with
technology and knows about all the price comparison engines for different products. He found
out about different price comparison websites and was able to find good deals for his car
insurance. Then Uday noticed HDFC ERGO agent's office one day while taking a ride of the city.
The agent's office reminded him of HDFC ERG0's "Drive safe and save" commercial. He started
wondering whether this program could save him money.
What would be a typical journey he would take to find the options available through HDFC ERGO?
Uday would like HDFC ERGO to satisfy his needs online without having to visit its office. But he
would also like to talk to the local agent online. Can HDFC ERGO connect him to the local agent
online? Will his experience on the online website and with local agent be seamless, meaning he
wouldn't have to repeat the same information to the local agent that he provided online? Can
HDFC ERGO persuade Uday that it can offer the best insurance for him in the long term, even
though some of the insurance providers may provide lower rates in the comparison websites?
(6) Draw a customer journey for the persona to answer al the questions, with appropriate
touchpoints. The CJ should address the following
a) Purchase stages b) front and backstage c) customer actions d) emotions (if any)
4.
Case: Henkel
Henkel is a globally operating group of companies offering a range of consumer goods extending
to adhesives. In Europe, Henkel has held a
from detergents, household cleaners, toiletries,
and household cleaners' market with brands such
leading position for decades in the detergents
the Dial brand.
Weifer Reise. In the United States, it is represented by
as Persil, Dixan, Vernel, and
such as P&G,
retail markets, many of the large manufacturers
In the hypercompetitive European
and managing supply chain efficiency.
Unilever and Henkel have focused on improving
management, where manufacturer and
activity is the concept of category
this
Part of
ongoing
retailers collaborate to improve the profitability
an
interesting number of firms
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are
of the category at the store level. However,
mastering the category management
as
process, manufacturers
such as Henkel are
of them
Te
looking at how they can
to
experiment with CRMdifferentiate themselves further. This is
have started
majorly
dependent on third party
practices. In the Indian context, where many
Pofuct basis,
owned
and a-Hack
distribution channels, have low FMCG companies
of direct
etailer
margins on a per
generally believes that a consumer contact. As this sector is
the
highly
customer is primarily an
counter rather than
unorganized, the
a
of
aggregate
buyer
particular brand seeker. The CRM
target high value
products sold from
is
customers
approach
useful
and
to
to then
practice, this means
identify and
devise a retention or
growth
tor them. In
strategy
allocating
disproportionate
strongly
established
in
direct-to-consumerresources to these customers. Whereas CRM is
environments such
telecommunications,
the exact nature
of CRM in the
environment
is less clear.
Marico etc. is to
Therefore, the
as
banking or
fast-moving consumer goods (FMCG)
define, conceptualize, andchallenge that lies in front of firms such as Henkel, P&6,
How would
you define and measure
implement a suitable CRM approach.
customer value to Henkel or
value on the
P&G? Should it define
individual level or on the
level.
segment
What are the
(5 marks)
ways manufacturers of FMCG can
establish
its final
close customer
customers?
with
(5 marks)
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relationships