1. Using the framework in Figure 9-4, how would you categorize each of the three customer segments?

2. How should Johnson Snacks respond to the letter from Discount 2 You?

Murray Griffin, manager of distribution for Johnson Snacks, was faced with a difficult task. The company deals with three types of customers: grocery stores, drug stores, and a mass merchant with several locations. Harold L. Carter, the new CEO had circulated a letter from Johnson Snacks’ only mass merchandise customer, Discount 2 You, complaining of poor operating performance. Among the problems cited by Discount 2 You were:

(1) Frequent stock outs

(2) Poor customer service responsiveness

(3) High prices for Johnson Snacks’ products.

The letter suggested that if Johnson Snacks were to remain a supplier to Discount 2 You, it would need to eliminate stock outs by:

(1) Providing direct store delivery four times per week (instead of three)

(2) Installing an automated order inquiry system to increase customer service responsiveness ($300,000 investment)

(3) Decreasing product prices by 5 percent. The company had never analyzed customer profitability, and wasn’t sure how to respond to these demands.