Jamestown Electric

1. Initial Customer Profitability System

According to information provided in case study in Exhibit 2, the most profitable customer for Jamestown Electric Supply Company is Alanson ($450,225); next is Boyne ($205,170) and the least profitable customer according to the initial system is Conway ($55,890).

Alanson and Conway are large and small automobile industry clients, respectively; Boyne is medium-sized non-automobile industry client. Based on information in Exhibits 2 and 3 different shares of sales to selected three customers are calculated and presented in table below:

  | Alanson | Boyne | Conway |

Share of total sales | 6,3% | 2,4% | 0,8% |

Share of sales among same type clients | 11,5% | 5,4% | 0,8% |

Share of sales among same size clients | 12,4% | 4,8% | 5,4% |

Share of sales among same type and size clients | 19,1% | 13,5% | 8,7% |

Sales to Alanson make 6,3% of total sales of Jamestown company and 12,4% of sales to Large clients of the company. Sales to Boyne make 2,4% and 4,8%, respectively; In case of Conway these shares are 0,8% and 5,4%.

Companies Alanson, Boyne, and Conway are defined as key clients for Jamestown\s Company. Two of them, Alanson and Conway, are acting in the same industry. Jamestown management calculating customer profitability could take into account the peculiarity of the industry.

Alanson is a large client in terms of sales volumes, the management of Jamestown should keep the volumes of sales on the same level or try to increase sales to this customer, the last option is, of course, more preferable. As to Boyne, who is a medium-size client, the purpose is to increase sales as much as possible. The same policy could be taken by Jamestown management also toward Conway.

As already was mentioned above, peculiarity of the industry could be taken into account in calculations of customers’ profitability. It may be that customers from different industries would need/used different services provided by Jamestown....