Creating Customer Value: General Concept Questions

Chapter 5 Creating client Value, Satisfaction, and Loyalty GENERAL CONCEPT QUESTIONS Multiple Choice1. ________ atomic number 18 adept at get alonging node relationships, non just harvest-homes they be skilled in commercialise engineering, non just convergence engineering. a. Profit-centered companies b. client-centered companies c. Production-centered companies d. Sales-centered companies e. Promotion-centered companies get along bvarlet 119Difficulty roaringAACSB pensive Thinking2. The opening vignette on Ritz-Carlton rises that self- do marketers are the ones that fully ________. a. study promotional strategy b. diversify their proceeds line . divorce themselves from a overlapion mentality d. live up to their guests profitably e. understand the sales concept attend to dPage 120Difficulty average AACSB pondering Thinking3. In the modern guest-oriented boldnessal chart, which of the future(a) is considered to be at the chair of the organizational realis e? a. Sales b. The president c. Front-line people d. customers e. Middle heed resolving dPage 121Difficulty spiritualist4. ________ is the difference betwixt the prospective clients evaluation of every the arrive ats and each the cost of an declare oneselfing and the perceived alternatives. a. Perceived utileness . Failure avoidance rate c. Report rating d. Customer-perceived esteem e. Competitors market share rate behave dPage 121Difficulty spiritualist AACSB uninflected Skills5. Total client benefit is the perceived monetary appraise of the bundle of economic, functional, and ________ benefits clients expect from a given market offering. a. psychological b. intangible c. realized d. fabricated e. bared serve up aPage 121Difficulty unverbalizedAACSB analytical Skills6. The bundle of cost nodes expect to incur in evaluating, obtaining, using, and disposing of the given market offering is c onlyed the ________. a. rganizational expense dimension b. shoppers fatigue c. total node cost d. abbreviation paralysis e. comparison shopping to comparison buying ratio reception cPage 121Difficulty MediumAACSB analytical Skills7. In applying a guests perceived apprise to a decision, a seller who is at a disadvantage with respect to customer-perceived nurture has ii alternatives to make up total customer benefit or ________. a. step-up a cash-back bonus b. decrease total customer cost c. lose the sale to the competitor d. advertise much frequently e. offer an extended warranty coif bPage 123Difficulty MediumAACSB Analytic Skills8. The final step of customer judge analytic thinking is to ________. a. pick up the major attributes and benefits that customers value b. assess the gilds and competitors military operations on the different customer value against their rated importance c. examine how customers in a specific segment rate the societys performance against a specific major competitor on an singular attribute or benefit basis d. m onitor customer values over time e. assess the quantitative importance of the different attributes and benefits part dPage 122Difficulty Medium9.The ________ consists of the whole cluster of benefits the comp each promises to deliver it is more than the core positioning of the offering. a. customer promise b. mission statement c. corporate pledge d. corporate-perceived value e. value proposition root ePage 123Difficulty MediumAACSB Analytic Skills10. A partnerships ________ includes all the nonpluss the customer will have on the way to obtaining and using the offering. a. value proposition b. value pitch shot system c. customer-value analysis d. total customer benefit e. total customer cost Answer bPage 123Difficulty EasyAACSB Analytic Skills11. Total customer happiness is measured based on the relationship of ________. a. anticipated and real performance b. perceived performance and expectation c. advertised outcomes and real outcomes d. past experience and present experien ce e. customer attitude and salespersons attitude Answer bPage 124Difficulty overweightAACSB reflective Thinking12. The ultimate goal of the customer-centered firm is ________. a. high customer joy b. high profits c. low cost d. maximum stakeholder propitiation e. no(prenominal) of the above Answer ePages 124125Difficulty HardAACSB meditative Thinking13.Buyers form their expectations from all of the avocation tho ________. a. past buying experience b. heros and associates advice c. marketers information d. competitors information e. governmental unseasonedsletters Answer ePage 125Difficulty EasyAACSB Analytic Skills14. A customers decision to be truehearted or to defect is the sum of many small encounters with the company. In order for all these small encounters to add up to customer loyalty, many companies, such as Joie de Vivre hospitality, strive to create ________. a. a reward program b. a comprehensive customer database c. a branded customer experience . strong word -of-mouth promotions e. a top-notch advertising campaign Answer cPage 125Difficulty HardAACSB meditative Thinking15. One key to customer retention is ________. It would be wise for a company to measure this factor frequently. a. heavy promotion b. deep discounts for intermediaries c. to have an ethics officer d. customer delight e. to have customers on the board of directors Answer dPage 125Difficulty MediumAACSB Reflective Thinking16. ________ foundation track customer satisfaction directly and similarly gauge consumers willingness to recommend the company and brand to others. . Periodic surveys b. Mystery shoppers c. Customer loss rates d. Customer focus statements e. All of the above Answer aPage 126Difficulty Medium AACSB Analytic Skills17. Studies of customer dissatisfaction show that customers are dis commodious with their purchases about 25% of the time, but only about ________ complain. a. 1% b. 5% c. 10% d. 15% e. 20% Answer bPage 128Difficulty Hard18. Of customers who translate a complaint, ________. a. the majority will do line of descent with the company again beca ingestion they are unwilling to dedicate the effort required to find another vendor b. one will do business with the company again c. customers whose complaints are satisfactorily resolved spread more word of mouth than those who continue to be dissatisfied d. the speed of resolution has no impact on the likelihood of repeat business e. between approximately half and triad-quarters will do business with the company again if their complaint is resolved Answer ePage 129Difficulty Hard19. ________ is the totality of features and characteristics of a product or dish out that bear on its top executive to satisfy stated or implied needs. a. Performance b. Value c. feeling d. Customer retention e. ustomer loyalty Answer cPage 129Difficulty EasyAACSB Analytic Skills20. Total quality is the key to value base and customer satisfaction. A merchandising manager has several roles to play in a quality-centered company, including ________. a. participating in cross-functional team building b. correctly identifying customers needs and requirements c. ensuring costs are adequately controlled during order fulfillment d. great dealting expectations both internally and externally e. working closely with the sales team to create a alive(p) sales message Answer bPage 130Difficulty HardAACSB Analytic Skills21. The 2080 rule reflects the idea that ________. a. the top 20% of customers often generate 80% of the companys profits b. the top 20% of customers are highly satisfied and 80% of customers will recommend the company to a friend c. 20% of customers are unprofitable, and 80% make up a companys profits d. 20% of the companys profits are generated by the top 80% of customers e. any new product offering will be accepted by 20% of the customers immediately, but 80% of the customers will be up for grabs by means ofout the products life cycle Answer aPage 130Difficulty HardAA CSB Analytic Skills22. Most companies have learned that the ________ are often the most profitable because of service expectations and their willingness to pay almost full price. a. large-size customers b. midsize customers c. small-size customers d. niche customers e. target market customers Answer bPage 130Difficulty Medium23. A(n) ________ customer is a person, household, or company that over time yields a taxation stream that exceeds by an acceptable amount the companys cost stream of attracting, selling, and servicing that customer. a. profitable b. semiprofitable c. unprofitable d. niche e. target Answer aPages 130131Difficulty EasyAACSB Analytic Skills24. Customer lucrativeness analysis (CPA) is best conducted with the overlyls of an accounting technique called ________. a. input-output analysis b. factor analysis c. revenue-based costing (RBC) d. activity-based costing (ABC) e. future date costing (FDC) Answer dPage 131Difficulty MediumAACSB Reflective Thinking25. ______ __ describes the net present value of the stream of future profits expected over the customers living purchases. a. Activity-based costing b. Customer positiveness analysis c. Customer value analysis . Customer-perceived value e. Customer lifetime value Answer ePage 132Difficulty Medium AACSB Analytic Skills26. The aim of customer relationship management (CRM) is to bugger off high customer ________. a. value b. loyalty c. profitability d. satisfaction e. equity Answer bPage 133Difficulty Medium27. A customer touch point in the airline patience would include an stage such as ________. a. reservations b. mechanics ability to service the airplanes c. ease of access to the airport d. the value of air travel versus surface transfer e. competency of a travel agent Answer aPage 133Difficulty MediumAACSB Reflective Thinking28. Customer relationship management enables companies to provide excellent real-time customer service through the in effect(p) use of _______. a. reports from m ystery shoppers b. survey data from customers who have defected c. market research into overall consumption modes d. individual account information e. demographic trend data Answer dPage 135Difficulty HardAACSB Reflective Thinking29. All of the succeeding(a) would be among the Peppers and Rogerss four-step framework for one-to-one marketing that stomach be adapted to CRM marketing EXCEPT ________. . customizing products, services, and messages to each customer b. interacting with individual customers to learn their needs c. al slipway offering the lowest price d. differentiating customers in terms of their needs and value to the company e. identifying your prospects and customers Answer cPage 135Difficulty HardAACSB Analytic Skills30. Winning companies improve the value of their customer base by excelling at each of the by-line strategies EXCEPT ________. a. retaining all customers regardless(prenominal) of profitability b. step-down the rate of customer defection c. ncreasing the longevity of the customer relationship d. make low-profit customers more profitable or terminating them e. focusing disproportionate efforts on high-value customers Answer aPage 136Difficulty MediumAACSB Reflective Thinking31. Harley-Davidson sells more than motorcycles and accessories. Its dealerships also sell branded clo involvement and licensed practiceds. This expansion of dealership sales offerings is an attempt to increase the value of the customer base by ________. a. reducing the rate of customer defection b. increasing the longevity of the customer relationship . enhancing the growth potential of each customer through cross-selling d. do low-profit customers more profitable e. terminating low-profit customers Answer cPage 136Difficulty Medium AACSB Reflective Thinking32. Although actual costs vary from business to business depending on the complexity of the sales process, the most expensive customer acquisition method based on cost per solicitation is ________. a. p ersonal selling b. direct mail c. telemarketing d. banner advertisements e. e-mail Answer aPage 137Difficulty MediumAACSB Analytic Skills33.Another term for high customer ________ is customer churn. a. retention b. defection c. value d. perception e. belief Answer bPage 137Difficulty EasyAACSB Analytic Skills34. People with the motivation, ability, and opportunity to make a purchase are known as ________. a. potentials b. advocates c. members d. prospects e. partners Answer dPage 137Difficulty Medium AACSB Analytic Skills35. Customers who enthusiastically recommend the company and its products and services to others are known as ________. a. potentials b. advocates c. members d. prospects e. partners Answer bPage 137Difficulty Medium AACSB Analytic Skills36. Satisfied customers constitute the companys ________. a. customer relationship capital b. customer churn c. prospects d. high-value customers e. customer touch points Answer aPage 138Difficulty Medium37. acquiring new customers can cost ________ times more than satisfying and retaining current customers. a. two b. three c. quintuplet d. seven e. 10 Answer cPage 138Difficulty Hard38. All of the following are methods to form strong customer bonds EXCEPT ________. a. creating superior products, services, and experiences for the target market b. aking it easy for customers to reach the appropriate company personnel and express their needs, perceptions, and complaints c. organizing and making accessible a database of information on individual customer needs, preferences, contacts, purchase frequency, and satisfaction d. running award programs recognizing outstanding employees e. concentrating the planning and management of the customer satisfaction and retention process within the marketing department Answer ePage 138Difficulty HardAACSB Reflective Thinking39. When companies provide rewards to customers who buy frequently and in ubstantial amounts, this is referred to as ________. a. benefit programs b. freque ncy programs c. satisfaction programs d. loyalty programs e. quality programs Answer bPage 139Difficulty EasyAACSB Analytic Skills40. Typically, ________ gains the most benefit from introducing a frequency program. a. the first company to introduce a frequency program in an attention b. the fast follower, who is second to introduce a frequency program in an industry, c. the industry sales leader d. the niche player in the industry e. the low-cost leader in the industry Answer aPage 140Difficulty MediumAACSB Reflective Thinking41. All of the following are CRM imperatives EXCEPT ________. a. acquiring the right customer b. crafting the right value proposition c. instituting the best processes d. motivating employees e. learning to make profits through marginal customers Answer ePage 141Difficulty HardAACSB Analytic Skills42. CRM technology can help motivate employees by ________. a. analyzing customer revenue and cost data to identify current and future high-value customers b. better targeting the companys direct marketing efforts c. racking customer-service satisfaction levels d. aline employee incentives and metrics e. developing new pricing models Answer dPage 141Difficulty Hard AACSB Reflective Thinking43. According to Stanfords business guru Jeffery Pfeffer, the best companies build cultures in which frontline people ________. a. can refer serious problems to senior management b. have strictly limited freedom to deviate from standard operating procedures c. are also consumers of the companys products d. are empowered to do whats needed to take care of the customer e. ive in the communities they serve Answer dPage 142Difficulty Medium AACSB Reflective Thinking44. An organized prayer of comprehensive information about individual customers or prospects that is current, accessible, and actionable for such marketing purposes as lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships is called ________. a. a customer database b. a customer mail list c. target market segments d. customer segments e. relationship markets Answer aPages 142143Difficulty MediumAACSB Analytic Skills45.The process of building, maintaining, and using customer databases and other databases for the purpose of contacting, transacting, and building customer relationships is called ________. a. data warehousing b. datamining c. database marketing d. custom marketing e. electronic marketing Answer cPage 143Difficulty EasyAACSB Analytic Skills46. A _____________ is simply a set of names, addresses, and tele headphone numbers. a. customer database b. customer mailing list c. call-waiting list d. psychographic list e. demographic list Answer bPage 143Difficulty Easy47. A customer database should pick up all of the following EXCEPT ________. a. customers past purchases b. demographics c. psychographics d. mediagraphics e. an assessment of competitive strengths and reekingnesses Answer ePage 143Difficulty MediumAACSB R eflective Skills48. A ________ would contain such items as past slews, prices, profits, purchaser, status of current contacts, and an assessment of competitive strengths and weaknesses. a. customer mailing list b. contact list c. customer database d. business database e. normal corporate database Answer dPage 143Difficulty EasyAACSB Analytic Skills49. Savvy companies are capturing information every time a customer comes into contact with any of its departments. As a marketing manager all of the following would be available customer touch points for your consideration EXCEPT ________. a. a customer purchase b. an online query c. a mail-in discount card d. an ad run on a national television network e. a customer-requested service call Answer dPage 143Difficulty Medium50. Using his companys ________ lets a telemarketer respond to customer inquiries more effectively because he or she can see a total picture of the customer relationship. a. data warehouse b. call back list c. call re jection list d. corporate database e. Better Business Bureau contacts Answer aPage 143Difficulty Medium51. Through ________, marketing statisticians can extract useful information about individuals, trends, and segments from the mass of data. a. data accumulation b. target market information supplied by the government c. datamining d. data management e. data marketing Answer cPage 143Difficulty MediumAACSB Analytic Skills52. ________ involves the use of sophisticated statistical and numerical techniques such as cluster analysis, automatic interaction detection, predictive modeling, and neural networking. a. info management b. Data marketing c. Target market analysis d. Data accumulation e. Datamining Answer ePage 143Difficulty MediumAACSB Analytic Skills53. In general, companies can use their databases in all of the following ways EXCEPT ________. a. to predict competitive strategies and plans b. to identify prospects c. to decide which customers should receive a particular offer d . to sharpen customer loyalty e. to avoid serious customer mistakes Answer aPages 143145Difficulty MediumAACSB Analytic Skills54. Susan Lefferts company advertises widely. Ms. Lefferts uses business reply cards attached to her companys magazine ads to build her companys database. In which of the following ways would Ms. Lefferts most in all likelihood use the database? a. To deepen customer loyalty b. To reactivate customer purchases c. To avoid serious customer mistakes d. To determine if up-selling is appropriate e. To identify prospects Answer ePage 143Difficulty HardAACSB Reflective Thinking55. Phil Langston has just ordered a number of expensive executive gifts that he will be loading as an appreciation souvenir to a select few customers from his client database. In which of the following ways is Mr. Langston most likely using his database? a. To identify prospects b. To decide which customers should receive a new sales offer c. To deepen customer loyalty . To avoid serious customer mistakes e. To beat the competition to a sale Answer cPage 145Difficulty MediumAACSB Reflective Thinking56. gallant Caribbean uses its ________ to offer spur-of-the-moment cruise packages to fill all the berths on its ships. It focuses on retired people and single people because they are more able to make firm commitments. a. advertising b. database c. mail catalogs d. public relations department e. radio advertising Answer bPage 145Difficulty Easy57. Which of the following is considered to be one of the four problems that can deter a firm from using CRM (customer relationship marketing)? . Competitors can often hack into CRM systems. b. Building and maintaining a customer database requires a large investment. c. It is very difficult to find and choose database employees. d. Long-term results of such systems are still unproven. e. Focusing too much on databases separates a company from its customers. Answer bPage 145Difficulty MediumAACSB Reflective Thinking58. Building a database would not be worthwhile for a company in all of the following grammatical cases EXCEPT ________. a. where the product is a one-in-a-lifetime purchase b. where customers show little loyalty to a brand c. here the company already has an above average relationship with its customers d. where the unit sale is very small e. where the cost of gathering the information is too high Answer cPages 145146Difficulty Hard59. All of the following are examples of the perils of CRM EXCEPT ________. a. implementing CRM before creating a customer strategy b. the enormous cost that index ultimately drain significant profits from the organization c. rolling out CRM before changing the organization to match d. assuming more CRM technology is better e. stalking, not wooing, customers Answer bPage 146Difficulty Medium60.Marketers from which of the following are most likely to use database marketing? a. An airline b. A candy bar manufacturer c. A grand gentle maker d. A toothpaste manufact urer e. None of the above would use database marketing. Answer aPage 146Difficulty Medium AACSB Reflective Thinking True/False61. Managers who think the customer is the companys only true profit center consider the traditional organization chart to be obsolete. Answer TruePage 120Difficulty Easy62. The modern customer-oriented organization chart places top management at the top of the pyramid as long as they can think like consumers. Answer FalsePage 120Difficulty Medium AACSB Reflective Thinking63. There are two determinates of customer-perceived value total customer benefit and total customer cost. Answer TruePage 121Difficulty Medium AACSB Analytic Skills64. Customer-perceived value is the perceived monetary value of all the purchases a customer makes on an annual basis. Answer FalsePage 121Difficulty Medium AACSB Analytic Skills65. Consumers tend to be value maximizesthey estimate which offer will deliver the most perceived value and act on it. Answer TruePage 121Difficulty Eas y AACSB Analytic Skills66. At the heart of a good value delivery system is a set of core business processes that help to deliver distinctive customer value. Answer TruePage 123Difficulty Hard AACSB Analytic Skills67. Professional buyers and purchasing agents operate under various constraints and at times make choices that give more weight to their personal benefit than to the companys benefit. Answer TruePage 123Difficulty Medium AACSB Reflective Thinking68. The value proposition is stated in the price of a product and readily recognized by the average consumer. Answer FalsePage 123Difficulty Medium AACSB Analytic Skills69. The value delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. Answer TruePage 123Difficulty Medium AACSB Analytic Skills70. For a consumer to be delighted with a product or service he or she must perceive that performance exceeds expectations. Answer TruePage 124Difficulty Easy AACSB Analytic Skills 71. The ultimate goal of the customer-centered firm is to create high customer satisfaction. Answer FalsePage 124Difficulty Hard AACSB Reflective Thinking72.One key to customer retention is customer satisfaction. Answer TruePage 125Difficulty Easy73. Consumers expectations result exclusively from past buying experiences. Answer FalsePage 125Difficulty Medium74. A highly satisfied customer generally stays loyal longer, pays less attention to competing brands, and is less sensitive to price. Answer TruePage 125Difficulty Medium75. Price perception is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Answer FalsePage 129Difficulty Medium AACSB Analytic Skills76. Conformance quality and performance quality is fundamentally the akin thing in a marketing sense. Answer FalsePage 129Difficulty Medium AACSB Analytic Skills77. Two products with very different performance qualities can have the same conformance qu ality if both products deliver their respective promised quality. Answer TruePage 129Difficulty Hard AACSB Analytic Skills78. Marketers have found that pricing plays the most essential role in defining and delivering high-quality goods and services to target customers. Answer FalsePage 130Difficulty Easy AACSB Reflective Thinking79.The midsize customers for most organizations receive good service, pay nearly full price for the products and services they purchase, and are often the most profitable. Answer TruePage 130Difficulty Medium AACSB Reflective Thinking80. A profitable customer is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the companys cost stream of attracting, selling, and servicing the customer. Answer TruePages 130131Difficulty Medium AACSB Analytic Skills81. The best thing a company can do in the face of company mistakes is to discourage the customer from complaining. Answer FalsePage 129Difficulty Easy AACS B Reflective Thinking82. Quality is the key to value creation and customer satisfaction. Answer TruePage 130Difficulty Medium83. The least profitable 10% to 20% of customers can reduce profits by 50% to 200% per account. Answer TruePage 130Difficulty Medium AACSB Analytic Skills84. Most companies measure customer satisfaction and individual customer profitability. Answer FalsePage 131Difficulty Medium85. Unprofitable customers who defect to a competitor should be encouraged to do so. Answer TruePage 131Difficulty Medium AACSB Reflective Thinking86. Customer profitability analysis (CPA) is best conducted with the tools of an accounting technique called activity-based costing (ABC). Answer TruePage 131Difficulty Medium87. According to customer profitability analysis (CPA), platinum customers spend the most money with the organization, thereby making them valuable. Answer FalsePage 131Difficulty Hard AACSB Analytic Skills88. Customer lifetime value (CLV) describes the net present value of the stream of future profits expected over the customers lifetime purchases. Answer TruePage 132Difficulty Medium AACSB Analytic Skills89. A good illustration of a personal touch in the hotel business would be if the hotel employees (e. g. , registration, maid service, et cetera) call a guest by his or her name. Answer TruePage 133Difficulty Easy AACSB Reflective Thinking90. A customer touch point is the time when the customer makes a purchase. Answer FalsePage 133Difficulty Medium AACSB Analytic Skills91. The aim of customer relationship management is to keep the costs of meeting and tracking consumers as low as possible. Answer FalsePage 133Difficulty Medium AACSB Reflective Thinking92.All companies should practice one-to-one marketing. Answer FalsePage 135Difficulty Medium93. A key driver of stockholder value is the aggregate value of the customer base. Answer TruePage 136Difficulty Medium94. Customer churn is how rapidly a store can move customers through its checkout adept ness or process. Answer FalsePage 137Difficulty Medium95. The average company loses 25% of its customers each year. Answer FalsePage 138Difficulty HardAACSB Analytic Skills96. A customer database is simply a listing of a customers name, address, and phone number for conviction reference.Answer FalsePages 142143Difficulty Easy97. Its often easier to reattract ex-customers (because the company knows their names and histories) than to find new ones. Answer TruePage 142Difficulty Medium AACSB Reflective Thinking98. Cluster analysis is a good example of a statistical technique that might be employed in datamining. Answer TruePage 143Difficulty MediumAACSB Analytic Skills99. It always costs less to serve loyal customers than to attract new ones. Answer FalsePage 146Difficulty Medium AACSB Analytic Skills100.Database marketing is most frequently used by business marketers and service suppliers (hotels, banks, airlines, and insurance, credit card, and telephone companies) that normally an d easily collect a lot of customer data. Answer TruePage 146Difficulty Medium Essay101. Compare and contrast the traditional organization chart for an organization against the modern customer-oriented organization chart. Suggested Answer For a visual comparison, see Figure 5. 1. With respect to a written description, students should note that the modern customer-oriented organization chart is invert (see the traditional model e. g. top managementmiddle managementfrontline peoplecustomers). Customers are at the top, followed by frontline people, then middle management, and, lastly, top management. Students might also provide some discussion on why the inversion is beneficial. Pages 120121Difficulty Medium AACSB Analytic Skills102. Provide a customer-centered definition of the term quality. Suggested Answer Quality is the totality of features and characteristics of a product or service that bear on the ability to satisfy stated or implied needs. This is clearly a customer-centered de finition. Page 129Difficulty Easy AACSB Reflective Thinking103.Differentiate between performance quality and conformance quality. split an example of two products that have different performance quality but are of adjoin conformance quality. Suggested Answer Performance quality is the quality of the products attributes. Conformance quality is the extent to which the product delivers the performance quality promised to consumers. A Lexus provides higher(prenominal) performance quality than a Hyundai The Lexus rides smoother, goes faster, and lasts longer. Yet both would deliver the same conformance quality if both delivered their respective promised quality. Page 129Difficulty Hard AACSB Analytic Skills104. The case for maximizing long-term customer profitability is captured in the concept of customer lifetime value. How is customer lifetime value calculated? Suggested Answer Customer lifetime value describes the net present value of the stream of future profits expected over the c ustomers lifetime purchases. The company must subtract from its expected revenues the expected costs of attracting, selling, and servicing the account for that customer, applying the appropriate discount rate (depending on cost of capital and endangerment attitudes). Page 132Difficulty Hard AACSB Analytic Skills105.Peppers and Rogers outline a four-step framework for one-to-one marketing that can be adapted to CRM marketing. What are those four steps? Suggested Answer The four steps are (1) Identify your prospects and customers (2) differentiate customers in terms of their needs and their value to your company (3) interact with individual customers to improve your knowledge about their individual needs and to build stronger relationships and (4) customize products, services, and messages to each customer. Page 135Difficulty Hard AACSB Analytic Skills106. A key driver of shareholder value is the aggregate value of the customer base. Identify the five strategies employed by winning companies to improve the value of their customer base. Suggested Answer Winning companies improve the value of their customer base by excelling at the following five strategies (1) reducing the rate of customer defection (2) increasing the longevity of the customer relationship (3) enhancing the growth potential of each customer through share-of-wallet, cross-selling, and up-selling (4) making low-profit customers more profitable or terminating them and (5) focusing disproportionate effort on high-value customers. Page 136Difficulty Hard AACSB Reflective Thinking107. Today, companies are increasingly concerned about customer defection. There are three main steps a company can take to reduce the defection rate. Characterize those three steps. Suggested Answer The three steps are (1) The company must define and measure its retention rate (2) the company must distinguish the causes of customer attrition and identify those that can be managed better and (3) the company must compare the lost profit equal to the customer lifetime value from a lost customer to the costs to reduce the defection rate. Page 137Difficulty Hard AACSB Analytic Skills108. Discuss the concepts of a data warehouse and datamining. Suggested Answer Data are collected by the companys contact center and organized into a data warehouse. Company personnel can capture, query, and analyze the data. Inferences can be drawn about an individual customers needs and responses. Through datamining, marketing statisticians can extract useful information about individuals, trends, and segments from the mass of data. Datamining involves the use of sophisticated statistical and mathematical techniques. Page 143Difficulty Medium AACSB Analytic Skills109.Assume that a marketing manager of a small company is in the process of implementing the use of a database to assist his or her company in its marketing efforts. Considering the information found in the text, list five ways that the marketing manager might be abl e to use the database for marketing efforts. Suggested Answer Five ways to use a database for marketing efforts include (1) to identify prospects (2) to decide which customers should receive a particular offer (3) to deepen customer loyalty (4) to reactivate customer purchases and (5) to avoid serious customer mistakes. Pages 143-145Difficulty Medium AACSB Reflective Thinking110. Describe four situations or cases when building a customer database would not be worthwhile for a company. Suggested Answer Four situations or cases when building a customer database would not be worthwhile for a company would be (1) where the product is a once-in-a-lifetime purchase (2) where customers show little loyalty to a brand (3) where the unit sale is very small and (4) where the cost of gathering information is too high. Pages 145146Difficulty Medium AACSB Reflective ThinkingAPPLICATION QUESTIONS Multiple Choice111. John Chambers, CEO of Cisco Systems, said, Make your customer the center of your c ulture. Customer-centered companies are adept at building customer relationships, not just producing products they are skilled in ________, not just product engineering. a. service engineering b. market engineering c. heathen engineering d. innovation engineering e. management engineering Answer bPage 119Difficulty Medium112. Immediately below the customers in a modern customer-oriented organization chart, we would expect to find the ________ of an organization. . top management b. marketing department c. middle management d. frontline people e. service department Answer dPage 121Difficulty Easy AACSB Analytic Skills113. All of the following are considered to be customer costs EXCEPT ________. a. financial cost of acquiring the product b. financial cost of disposing of the product c. time spent acquiring the product d. the risk of social stigma associated with acquiring the product e. All of the above are considered to be customer costs. Answer ePage 121Difficulty Medium AACSB Ref lective Thinking114.When a consumer considers a product or service, he or she will choose whichever product or service delivers the highest ________. a. customer-perceived value b. customer-perceived cost c. consumer discount d. consumer relationship e. consumer synergy Answer aPage 121Difficulty Medium AACSB Analytic Skills115. Buyers do not always make logical or rational decisions. They might purchase the most expensive and least quality item for example. Which of the following would be another good example of this behavior? a. The buyer is not seen by the seller as being very intelligent. b. The buyer might be under orders to buy at the lowest price. . The buyer might be underage. d. The buyer might be under pressure to resist sales messages. e. The buyer refuses to listen to or read any advertising. Answer bPage 123Difficulty Medium AACSB Reflective Thinking116. If a company were to focus its marketing efforts on all the experiences the customer will have on the way to obtainin g and using the offering, it would be focusing its marketing efforts on the customers ________. a. perception system b. cost versus benefit system c. demand d. psychological system e. value delivery system Answer ePage 123Difficulty Medium AACSB Analytic Skills117. _______ is defined as a deeply held commitment to rebuy or repatronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior. a. Customer satisfaction b. Customer value c. Loyalty d. Customer profitability e. Quality Answer cPage 123Difficulty Medium AACSB Analytic Skills118. Whether the buyer is satisfied after purchase depends on the offers performance in relation to the ________. a. buyers reactions b. buyers expectations c. sellers delivery d. sellers expectations e. both the buyers and sellers demands Answer bPage 124Difficulty Medium AACSB Analytic Skills119. Buyers form expectations in all of the following ways EXCEPT ____ ____. a. from past buying experience b. from friends and associates advice c. from marketers information d. from competitors information e. from inherited traits Answer ePage 125Difficulty Easy AACSB Analytic Skills120. Field Grocery is considering using _________ to pose as customers and report on strong and weak points in customer service at Field Grocery stores. a. intelligence agents b. covert operatives c. mystery shoppers d. market mavens e. opinion leaders Answer cPage 126Difficulty Easy121. 3M makes it easy for dialog to occur with its customers. 3M claims that over two-thirds of its product-improvement ideas come from listening to ________. a. customer suggestions b. entrepreneurial product ideas c. customer complaints d. media feedback e. customer reactions to competitive products Answer cPage 129Difficulty Medium AACSB Analytic Skills122. According to GEs former chairman, John F. Welch Jr. , ________ is our best assurance of customer allegiance, our strongest defense aga inst foreign competition, and the only path to sustained growth and earnings. a. Quality b. Customer satisfaction c. True value d. Sustainable enterprise e. Motivation Answer aPage 129Difficulty Hard AACSB Analytic Skills123. With respect to customer profitability analysis, ________ customers are the most likely dropped as customers because of poor profitability. a. granite b. wood c. iron d. plastic e. lead Answer ePage 131Difficulty Medium124. Jim is a residential construction contractor. Although one particular realtor provides Jim with a large volume of work, the realtor frequently demands discounts for sending him customers. This realtor is best described as a(n) ________ customer. a. latinum b. gold c. lead d. iron e. ivory Answer dPage 131Difficulty Medium AACSB Reflective Thinking125. Harrahs has used effective ________ to almost double its share of customers gaming budgets by targeting offers to specific customer segments. a. customer relationship management b. customer li fetime value c. customer profitability analysis d. customer satisfaction analysis e. customer-value delivery Answer aPage 135Difficulty Medium AACSB Analytic Skills126. Many banks and phone companies now charge fees for once-free services to ensure tokenish customer revenue levels. This is an example of ________. . reducing the rate of customer defection b. making low-profit customers more profitable c. enhancing the growth potential for each customer through cross-selling d. increasing the longevity of the customer relationship e. focusing disproportionate effort on high-value customers Answer bPage 136Difficulty Medium AACSB Reflective Thinking127. When Bob found out his friend was thinking about buying a new car, he strongly recommended that his friend look into the newest line of Ford sedans. Bob is best characterized as a(n) ________ for Ford. a. first-time customer b. member c. partner d. advocate e. rospect Answer dPage 137Difficulty Medium AACSB Reflective Thinking128. Caro l is currently considering buying a Motorola cell phone offered by her service provider in conjunction with a two-year service contract. Carol is best characterized as a(n) ________ for Motorola. a. first-time customer b. member c. partner d. advocate e. prospect Answer ePage 137Difficulty Medium AACSB Reflective Thinking129. Southwest Airlines offers a Rapid Rewards program, an example of a ________ that allows customers to count flights they have taken toward free future flights. a. value proposition b. value delivery system c. lub membership program d. one-to-one marketing program e. customer churn Answer cPage 140Difficulty Easy AACSB Analytic Skills130. The skillful use of database marketing and ________ has made catalog house Fingerhut one of the nations largest direct-mail marketers. a. everyday low prices b. expanded home delivery options c. relationship building d. competitors mistakes e. retailer alliances Answer cPage 145Difficulty Hard AACSB Analytic Skills Short Answer1 31. What do modern managers believe is their companys only true profit center? Suggested Answer Managers believe the customer is their only true profit center. Page 120Difficulty Easy AACSB Analytic Skills132. Customer-perceived value is based on two components. What are those components? Suggested Answer The two components of customer-perceived value are total customer value and total customer cost. Page 121Difficulty Medium AACSB Analytic Skills133. What is the definition for customer-perceived value (CPV)? Suggested Answer Customer-perceived value (CPV) is the difference between prospective customers evaluation of all the benefits and all the costs of an offering and the perceived alternatives. Page 121Difficulty Medium AACSB Analytic Skills134. Using European elevator car giant Volvo as your illustration, create a value proposition for the company. Suggested Answer Students may have several answers however, any value proposition must be built on their stated positioning objecti ve of safety. Other benefits that might be worked into a value proposition could be a long-lasting car, good service, and a long warranty period. Basically, the value proposition is a statement about the total experience customers will gain from the companys market offering and from their relationship with the supplier. Page 123Difficulty Medium AACSB Reflective Thinking135. How do customers determine their level of satisfaction with a product? Suggested Answer In general, satisfaction is a persons feelings of pleasure or disappointment that result from comparing a products perceived performance to the customers expectations. Page 124Difficulty Easy AACSB Reflective Thinking136. let up an example of a branded customer experience. Suggested Answer Students may have several answers. One example from the book is that of Joie de Vivre Hospitality Inc, which operates a chain of boutique hotels, restaurants, and resorts in the San Francisco area. The boutique concept enables hotels to offer personal touches, such as vitamins in place of chocolates on pillows. Page 125Difficulty Hard AACSB Reflective Thinking137. Companies need to be especially concerned straightaway with their customer satisfaction level. Why? Suggested Answer Companies need to be especially concerned today with their customer satisfaction level because the Internet provides a tool for consumers to cursorily spread bad word of mouth to the rest of the world. Page 126Difficulty Easy AACSB Reflective Thinking138. Identify three ways companies with customer complaints can recover customer goodwill. Suggested Answer Five methods are identified in the text. Students should present three of the following (1) Set up a 24/7 toll-free hotline to receive and act on customer complaints (2) contact the complaining customer as quickly as possible (3) accept responsibility for the customers disappointment (4) use customer-service people who are empathic and (5) resolve the complaint swiftly and to the custome rs satisfaction. Page 129Difficulty Medium AACSB Analytic Skills139.Define the term quality. Suggested Answer Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Page 129Difficulty Easy AACSB Analytic Skills140. What are the three ways that customer profitability can be assessed? Suggested Answer Customer profitability can be assessed individually, by market segment, or by channel. Page 131Difficulty Medium AACSB Analytic Skills141. What are the four classifications (tiers) of customers in customer profitability analysis using activity-based costing? Suggested Answer The tiers would be platinum customers (most profitable), gold customers (profitable), iron customers (low profitability but desirable), and lead customers (unprofitable and undesirable). Page 131Difficulty Hard AACSB Analytic Skills142. What is a customer touch point? Suggested Answer A customer touch point is any occasion on which a customer encounters the brand and productfrom actual experience to personal or mass communications to casual observation. Page 133Difficulty Medium AACSB Analytic Skills143. One-to-one marketing is not for every company. For whom does this direction of marketing work best? Suggested Answer One-to-one marketing works best for companies that normally collect a great deal of individual customer information, carry a lot of products that can be cross-sold, carry products that need periodic replacement or upgrading, and sell products of high value. Page 135Difficulty Hard AACSB Reflective Thinking144. A 5% reduction in the customer defection rate can increase profits by 25% to 85%, depending on the industry. pardon how this is so. Suggested Answer Acquiring new customers can cost five times more than satisfying existing customers. Customer profit rate also tends to increase over the life of the retained customer due to increased purchases, referrals, and price premiums and reduced ope rating costs to service. Page 138Difficulty Medium AACSB Reflective Thinking145. Explain how a company frequency program might work. Suggested Answer Frequency programs are designed to provide rewards to customers who buy frequently and in substantial amounts. Frequency programs hold the validity of the 2080 rule. Page 139Difficulty Medium AACSB Analytic Skills146. Describe the process of database marketing. Suggested Answer Database marketing is the process of building, maintaining, and using customer databases and other databases (products, suppliers, resellers) for the purpose of contacting, transacting, and building customer relationships. Page 143Difficulty Medium AACSB Analytic Skills147. How do companies use their databases to identify prospects?Suggested Answer Many companies generate sales leads by advertising their product or service. The ads generally contain a response feature, such as a business reply card or a toll-free phone number, and the company builds its databas e from customer responses. It sorts through the database to identify the best prospects, then contacts them by mail, phone, or personal call to convert them into customers. Page 143Difficulty Medium AACSB Reflective Thinking148. Give an illustration of how a company can use a customer database to reactivate customer purchases. Suggested Answer Companies can install automatic mailing programs that send out birthday or anniversary cards, Christmas shopping reminders, or off-season promotions. Other illustrations by students should be in a similar vein. Page 145Difficulty Medium AACSB Reflective Thinking149. One of the main problems that can prevent a firm from effectively using CRM is that some of the assumptions behind CRM may not always hold true. Give an example of one of these assumptions that might not always hold true. Suggested Answer It may not actually cost less to serve more loyal customers. Page 146Difficulty Medium AACSB Analytic Skills150. According to information provide d in the text, what are the four main perils of CRM? Suggested Answer The four main perils are (1) implementing CRM before creating a customer strategy (2) rolling out CRM before changing the organization to match (3) assuming more CRM technology is better and (4) stalking, not wooing, customers. Page 146Difficulty Hard AACSB Analytic Skills