Irving Xu, President of Armour Technologies Ltd., recently returned from a Conference and Trade Show in Edmonton, Alberta. Conversations with executives of similar companies have spoken glowingly of their tiered customer service systems. These conversations have influenced Xu to consider instituting a tiered service system. Upon his return, Xu had a brief conversation on the topic with you, the Customer Service manager.

The tiered system Xu is thinking about would reward good customers, $200,000 plus annual revenue, with a Good Customer rebate of 4% of total sales at the end of the year. Should there be any product issues, there would be a priority customer service category for those same customers. For customers accumulating annual sales of $400,000 or more, the year-end rebate would be 5.5%. Xu has request that you and your CSRs consider his proposal and write up the collective opinion. Xu believes in consultative decision-making with the ultimate decision being his.

Examine the advantages and disadvantages of tiered customer service in general and with respect to Dr. Xu's concept. View the case from Armour Technologies' perspective and the customers' perspective. Do not limit thinking to exclusively the "good" customers.