A small proportion of an organization's marketing units often generates a large proportion of the profits. This 80/20 situation can lead to decreased marketing productivity and constrained profits if not addressed.
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References
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WebsterF. E.LargayJ. A.StickneyC. O., “The Impact of Inflation Accounting on Marketing Decisions,”Journal of Marketing, vol. 44 (Fall 1980), pp. 9–17.
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4.
Although a firm could employ a pure “removal” strategy where marketing units are deleted but not replaced, such action is most likely only a short-run strategy. Therefore, we exclude the removal strategy from our discussion.
5.
For an excellent discussion about how to categorize products, salespeople, or customers into various groups so as to perform a profitability analysis, see JacksonD. W.Jr.OstromL. L., “Grouping Segments for Profitability Analyses,”MSU Business Topics, vol. 28 (Spring 1980), pp. 39–44.
6.
For an excellent discussion about how to perform profitability analysis, see, for example, BeikL. L.BuzbyS. L., “Profitability Analysis by Market Segments,”Journal of Marketing, vol. 37 (July 1973), pp. 48–53; LongmanD. R.SchiffM., Practical Distribution Cost Analysis (Homewood, Illinois: Richard D. Irwin, 1955); SevinC. H., Marketing Productivity Analysis (New York: McGraw-Hill, 1965).
