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ACCA Strategic Professional · Advanced Performance Management · Technology and information systems

Varda Foods uses customer loyalty-card data to segment shoppers and then sets differentiated sales targets and bonuses for regional managers based on the segment mix achieved. A review finds that the data set overrepresents urban customers because rural shoppers rarely use loyalty cards. What is the most significant risk to the performance and reward system?

The main risk is that targets and bonuses rest on biased data. Because rural shoppers are underrepresented, segment results do not reflect the whole customer base, so managers may be unfairly rewarded or penalised and decisions distorted. Data quality and representativeness matter more than volume here.

  1. AManagers will be rewarded or penalised on targets derived from biased data that does not represent the whole customer baseCorrect
  2. BThe data volume will be too small to store
  3. CLoyalty data is unstructured and cannot be analysed
  4. DSegmentation can only be used for marketing, not for targets

Explanation

Sample bias means segments and targets reflect urban behaviour, so rural managers may be unfairly assessed and decisions distorted. Volume is not the issue, loyalty data is generally structured, and segmentation can legitimately inform targets.

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