Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 55

Customer Loyalty and Profitability for Web Customers An important part of customer profitability is the cost to acquire a new customer. Bain and Company, a consulting firm, estimated that the cost of obtaining a new customer in the consumer electronics industry is so high that the firm needs an average of more than four years of business from each new customer to break even. However, industry statistics show that more than half the new customers will defect before the four-year breakeven point. The numbers are similar for the apparel industry. Many firms are now trying to acquire new customers at less cost, through the Web.

Required Give an example of a firm you know that uses the Web to attract customers and explain why you think the strategy should (or should not) work for that company.

Step 1 of 2

Activity based costing method which is commonly known as ABC method, is a costing method where indirect cost is assigned to product on the basis of activities identified, used in producing the product.