Telco Corporation Case Study: Focus on Customers

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The issues currently observed in Telco Corporation are nothing but the consequences of the wrong customer policy of the company. In more detail, Telco used to treat all its customers on a similar basis by spending equal sums of money for delivery and satisfying all customers’ requirements without paying attention to different profitability that customers might or might not bring to the company. Therefore, now Telco has to implement CRM and the first step in this process is to segment its customers according to profitability as such segmentation is one of the steps on the way of adopting the CRM approach intended by Telco. The benefits of such segmentation principle as profitability are evident as Telco will then have a chance to allocate its funds to satisfy the needs of the most profit-bringing customers and create alternative program packages for less profitable customers. Moreover, the segmentation of customers by profitability principle will allow Telco to save the money it wasted on non-profitable customer services and will also enable the company to stop the decrease of its actual operational revenue.

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Respectively, the implementation of the CRM approach demands the change of service offerings to the customers based on their profitability for Telco. There are two alternatives that most companies use while implementing the CRM, and Telco needs to choose one of them. The first way to re-tailor its service offering for Telco is to leave the same set of offerings to all customer segments but vary the quality and delivery terms based on profitability. The second way is to vary the set of offerings trying to maintain the major points valued by each customer segment most. Based on the need to reconsider the quality of the service presupposed by the first alternative, Telco should choose the second variant of tailoring its offerings set as the customers would not like to observe a decrease in the quality of goods they obtain.

As the result of the second alternative implemented, priorities of all customer segments will be considered as for instance illustrated by Table 1:

Table 1 Most Profitable Segment A
Product quality (% defects) Less than 1%
Delivery Time Within an hour
Credit Hold Less than 24 hours
Customer Support Service Personal representative
Middle Profitability Segment B
Product quality Up to 5%
Delivery Time Within a day
Return Policy Up to 3 days after delivery
Least Profitable Segment C
Delivery Time Within 4 hours
Payment Terms 3/10 net 40

Moreover, under the conditions of CRM implementation certain customers might feel a decrease in the quality and delivery terms of the goods. Saying that CRM is a new management policy, Telco should not mean that new customers will come to substitute the existing ones. Telco should ask no customer to take its business to another supplier as far as CRM is the tool designed to reorganize customers and make them interested in joining the most profitable customer segment of Telco instead of leaving the cooperation. What Telco should do instead is advise customers and help them reestablish their orders and requirements to Telco in a way that would mean the highest profitability to Telco and those customers and the lowest levels of costs Telco will have to face for handling those orders. Only such a constructivist approach will allow Telco to effectively implement CRM.

To avoid some customers’ leaving the partnership with Telco and to facilitate the implementation of CRM, the company should pay more attention to distributing the new service packages among the customer segments. The major executors of this innovation, i. e. people responsible for packages’ introduction should be the sales force of the company that is closely acquainted with the demands of all customer segments and might help design practices to introduce innovations with the least harm to Telco-customer communication. As for the terms of introduction of the new service packages, they can be either simultaneous or gradual, i. e. presupposing work with one customer segment after another. The latter variant is preferable as it allows checking the results of innovations and making improvements with the least harm to the work of the whole company. However, Telco should stick to the simultaneous introduction of new services as gradual one will cause dissatisfaction of other customer segments and might damage the customer base of the company.

All the above considerations lead to the final recommendation that Telco Corporation should reorganize its production and sales processes so that focuses on customers rather than on products. As nowadays six major divisions coincide with the main products offered by Telco, if the reorganization takes place Telco will have the number of divisions agreed with the number of market segments into which the customers will be divided. Moreover, to ensure customer satisfaction in every direction of Telco activity, these segment-based departments will be subdivided into six smaller units dealing with all Telco areas of business. Such a design of organizational metrics will be especially effective if Telco decides to use a simultaneous innovation introduction process for providing customer segments with varying service packages that would satisfy the basic requirements of every segment.

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