Fraser Office Supplies

Executive Summary:

The article talks about the Fraser Office Supplies, which offers Basic Office Supplies (such as clips, rubbers) and continued to expand its product line including Custom Printing ( such as business cards, labels), and also some Technology (such as computer accessories). FOS was based primarily on catalogue sales (established a strong online presence) and focus on serving the needs of small and medium size business. Now, FOS was facing some serious problems, which led the sales stagnant for the past three years no matter what different strategies they had tried. To persuade the profit is the common goals of companies, in order to get to this goal, there are some recommendations as following.

Recommendation

Increase the industry retention rate: particular of the top 25%: The retention rates have a direct impact on long-term customer value. In principle, if increase 5% of customer retention rate from 75% to 80%, improves 1 year of customer retention from 4 years to 5 years, LetÐŽ¦s take it in to calculation, and use 2002 as an example, the average revenue per client in the top 25% is $2430, and the customers in the top 25% is 1500 / 4 = 375, So the total revenue will increase 2430* 375 = 911250, it is about 71% of the total revenue of 2002. This example proves that customer retention can lead to significant increase in profitability. On the other hands, FOS may just focus on improving the retention rate in the particular of the top 25% customers, because itÐŽ¦s very difficult and very expensive to increase the customer retention rate, and most of the total revenue was generated by the top 25% of customers (not only in 2002), therefore, it can only spend 25% of the total expense in retention the top 25% customer, and generate 71% in total revenue. In order to improve the customer retention rate, FOS has to take time and money to build relationships with customers particular the top 25% (such as contact them frequently, and offer free delivery)

Use marketing activities to target the right customer and add more value to them: Every year, Fraser office supplies spend 8-9% of the total revenue in the marketing activities. however, most of the ads was focus on the lowest price, that is most of the advertising activities target on the customers who are price-sensitive and complain often, they often pay late or not at all. The problem with this kind of customer is that they never instill loyalty in then, only they concern about was the lower price, so, when the competitor come up with a lower price that even lower than FOS, all the kind of customers are gone. This is why 30% of the clients of FOS leave each year. Because of that, FOS has to change its targets of the marketing activities to the customers who buy lots from it, pay promptly, bring in other new customers and are pleasure to deal with. The kind of customer can bring more benefits to FOS. For example, they can save your marketing activities, because they have the loyalty to FOS, so they will save your time and money to build the relationship with them and also you do not need to spend much in advertising. In order to hold these customers, FOS will add more values