Case Notes/Answers
Case Solutions for Co-operative Bank, by Robert S.
Kaplan, Srikant M. Datar
Discussion Questions:
1. [Optional: use only if you wish to have a preliminary discussion on the role for ABC in service
organizations in general.] The Co-op Bank is our first experience with an ABC project applied to a
service organization. What new issues, if any, arise when applying ABC analysis to a service
business?
2. Comment on the process used to develop cost and profitability information on Personal Service
Products. Should Co-op Bank phase out the unprofitable Independent Financial Advice/Insurance,
and Pathfinder products?
3. How should the bank deal with the large number of unprofitable customers? When should
unprofitable customers be retained, and when should they be “demarketed?” How should David
Falwell decide how to direct his limited marketing resources?
4. Is the customer profitability and subsequent actions to concentrate on developing profitable
customer relationships compatible or inconsistent with the bank’s Mission Statement (Exhibit 2) and
Statement on Ethical Policy (Exhibit 3)?
, The Co-operative Bank
Teaching Note
This is a good case to introduce activity-based costing in a service organization. It provides a
clear description of how to implement ABC in banks, including identification of activities, tracing
resource costs to activities, selection of activity cost drivers, and linking costs and revenues to
products and customers. Of special interest is the unusual nature of the bank, founded 150 years ago
to serve people and companies in the cooperative movement. Even today, the bank has a strong
ideology with clearly stated ethical values and principles; yet it has to cope with all the problems of a
purely commercial enterprise; competition, deregulation, inefficiencies, and unprofitable products
and customers. The case also provides an opportunity to discuss the general issues that arise from
applying ABC in a service organization.
Assignment Questions:
1. [Optional: use only if you wish to have a preliminary discussion on the role for
ABC in service organizations in general.] The Co-op Bank is our first experience
with an ABC project applied to a service organization. What new issues, if any,
arise when applying ABC analysis to a service business?
2. Comment on the process used to develop cost and profitability information on
Personal Service Products. Should Co-op Bank phase out the unprofitable
Independent Financial Advice/Insurance, and Pathfinder products?
3. How should the bank deal with the large number of unprofitable customers?
When should unprofitable customers be retained, and when should they be “de-
marketed?” How should David Falwell decide how to direct his limited
marketing resources?
4. Is the customer profitability and subsequent actions to concentrate on developing
profitable customer relationships compatible or inconsistent with the bank’s
Mission Statement (Exhibit 2) and Statement on Ethical Policy (Exhibit 3)?
1
Case Solutions for Co-operative Bank, by Robert S.
Kaplan, Srikant M. Datar
Discussion Questions:
1. [Optional: use only if you wish to have a preliminary discussion on the role for ABC in service
organizations in general.] The Co-op Bank is our first experience with an ABC project applied to a
service organization. What new issues, if any, arise when applying ABC analysis to a service
business?
2. Comment on the process used to develop cost and profitability information on Personal Service
Products. Should Co-op Bank phase out the unprofitable Independent Financial Advice/Insurance,
and Pathfinder products?
3. How should the bank deal with the large number of unprofitable customers? When should
unprofitable customers be retained, and when should they be “demarketed?” How should David
Falwell decide how to direct his limited marketing resources?
4. Is the customer profitability and subsequent actions to concentrate on developing profitable
customer relationships compatible or inconsistent with the bank’s Mission Statement (Exhibit 2) and
Statement on Ethical Policy (Exhibit 3)?
, The Co-operative Bank
Teaching Note
This is a good case to introduce activity-based costing in a service organization. It provides a
clear description of how to implement ABC in banks, including identification of activities, tracing
resource costs to activities, selection of activity cost drivers, and linking costs and revenues to
products and customers. Of special interest is the unusual nature of the bank, founded 150 years ago
to serve people and companies in the cooperative movement. Even today, the bank has a strong
ideology with clearly stated ethical values and principles; yet it has to cope with all the problems of a
purely commercial enterprise; competition, deregulation, inefficiencies, and unprofitable products
and customers. The case also provides an opportunity to discuss the general issues that arise from
applying ABC in a service organization.
Assignment Questions:
1. [Optional: use only if you wish to have a preliminary discussion on the role for
ABC in service organizations in general.] The Co-op Bank is our first experience
with an ABC project applied to a service organization. What new issues, if any,
arise when applying ABC analysis to a service business?
2. Comment on the process used to develop cost and profitability information on
Personal Service Products. Should Co-op Bank phase out the unprofitable
Independent Financial Advice/Insurance, and Pathfinder products?
3. How should the bank deal with the large number of unprofitable customers?
When should unprofitable customers be retained, and when should they be “de-
marketed?” How should David Falwell decide how to direct his limited
marketing resources?
4. Is the customer profitability and subsequent actions to concentrate on developing
profitable customer relationships compatible or inconsistent with the bank’s
Mission Statement (Exhibit 2) and Statement on Ethical Policy (Exhibit 3)?
1
