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    Mini Case Differentiating Customer Service According To Customer Value at Akzo Nobel NI

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    Soumya Prakash Nayak
    Akzo Nobel, a large chemical and paint manufacturer, established a tiered customer service policy for its polymer division in the early 2000s. They recognized customers were demanding more services like product disposal and flexible delivery options without paying more. An investigation found little correlation between service levels and customer profitability. This led Akzo Nobel to develop a formal framework linking services to contribution margins calculated in a new customer scorecard. Services were designated as free, negotiable, or unavailable based on customer type and value to improve understanding of profit drivers and bottom line results.

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    Mini Case Differentiating Customer Service According To Customer Value at Akzo Nobel NI

    Uploaded by

    Soumya Prakash Nayak
    58 views1 page
    Akzo Nobel, a large chemical and paint manufacturer, established a tiered customer service policy for its polymer division in the early 2000s. They recognized customers were demanding more services like product disposal and flexible delivery options without paying more. An investigation found little correlation between service levels and customer profitability. This led Akzo Nobel to develop a formal framework linking services to contribution margins calculated in a new customer scorecard. Services were designated as free, negotiable, or unavailable based on customer type and value to improve understanding of profit drivers and bottom line results.

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    Mini Case_Akzo Nobel

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    Akzo Nobel, a large chemical and paint manufacturer, established a tiered customer service policy for its polymer division in the early 2000s. They recognized customers were demanding more services like product disposal and flexible delivery options without paying more. An investigation found little correlation between service levels and customer profitability. This led Akzo Nobel to develop a formal framework linking services to contribution margins calculated in a new customer scorecard. Services were designated as free, negotiable, or unavailable based on customer type and value to improve understanding of profit drivers and bottom line results.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    58 views1 page

    Mini Case Differentiating Customer Service According To Customer Value at Akzo Nobel NI

    Uploaded by

    Soumya Prakash Nayak
    Akzo Nobel, a large chemical and paint manufacturer, established a tiered customer service policy for its polymer division in the early 2000s. They recognized customers were demanding more services like product disposal and flexible delivery options without paying more. An investigation found little correlation between service levels and customer profitability. This led Akzo Nobel to develop a formal framework linking services to contribution margins calculated in a new customer scorecard. Services were designated as free, negotiable, or unavailable based on customer type and value to improve understanding of profit drivers and bottom line results.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    Mini Case

    Differentiating Customer Service According to Customer Value at Akzo Nobel NI

    Akzo Nobel, headquartered in Arnhem, Nertherlands, is one of worlds largest chemical


    manufacturers and also one of the world’s largest paint makers. Its chemical unit produces pulp
    and paper chemicals, functional chemicals (including flame retardants and animal feed
    additives), surfactants (used in detergents and personal care products), polymers, and catalysts.
    The polymer division, which serves exclusively the B-to-B market, established a tiered
    customer-service policy in the early 2000s. The necessity to introduce this policy came out of
    the recognition that customers are becoming more and more demanding when it comes to
    asking for additional services around the purchase of polymer products. For example,
    customers became increasingly aware that Akzo Nobel offers product disposal services, delivers
    nonstandard pallet sizes, and offers negotiable delivery times. On the one hand, Akzo Nobel did
    not typically charge for these services, and on the other hand, while extended services were
    typically offered only to medium- to high-volume clients, the relationship between service
    offerings and client profitability was not clear. When Akzo Nobel investigated more closely who
    received the service offerings, it found the correlation with client profitability (i.e., contribution
    margin) was very low. This finding led to the development of a formal tiered service-level
    framework within the polymer division.
    In the first step, the company developed a thorough list of all possible service activities
    the company currently offers. Interestingly, the sales force provided a significant number of
    these services with little further consideration. Since the sales force was compensated on the
    sales volume it generated, it had all the incentive to lure in clients with little consideration for
    bottom-line results. Concurrently, to formalize customer service activities, the company
    implemented a customer scorecard mechanism. The scorecard allowed it to measure and
    document contribution margins per individual customer. Based on these two pieces of
    information, the organization then specified which customer type should be eligible for which
    type of service. In terms of service allocation, it designated certain services would be free for all
    types of customers, certain services would be subject to negotiation for lower-level customers,
    and finally, certain services would not be available for the least valuable set of customers.
    Although the sales force was not very happy at first with these new measures, the new policy
    had a dramatic impact on the sales force understanding of the drivers of customer profitability.

    Questions
    1. How can an organization compute client-level profitability?
    2. What types of systems and processes are needed to document client profitability in a
    systematic and ongoing fashion?
    3. Is there a way to move established clients accustomed to receiving a large number of
    ancillary services for free to paying for these services?

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