sperm shack movies by Movesucka

VIEWS: 16,485 PAGES: 13

									Chapter 4 – Creating Customer Value, Satisfaction, and Loyalty
True/False Questions
1. Customer perceived value is defined as the difference between the prospective customer’s evaluation of all the benefits of an offering and the perceived alternatives. True (easy) p. 64 2. Product value, service value, and image value are all determinants of total customer cost. False (moderate) p. 64 3. Business and organizational customers always choose the highest delivered value when making an industrial product purchase. False (moderate) p. 65 4. Loyalty is defined as a deeply held commitment to re-buy or re-patronize a preferred product or service in the future, even in the face of situational or marketing influences with the potential to cause switching behavior. True (moderate) p. 65 5. Experts have defined quality in different ways. True (moderate) p. 68 6. A product can have conformance quality without having performance quality. True (moderate) p. 68 7. The 20-80-30 rule suggests that a company makes 80 percent of its profit from just 20 percent of its customers, about 30 percent of the time. False (difficult) p. 68 8. Figuring out your average customer lifetime value is one step toward understanding long-term customer profitability. True (moderate) p. 70 9. The more loyal the customers, the higher the customer equity. True (moderate) p. 71 10. Brand equity is the customer’s tendency to stick with the brand, above and beyond the objective and subjective assessment of its worth. False (difficult) p. 71 11. Developing one-to-one marketing through a CRM program might include not pursuing all customers. True (moderate) p. 72 12. According to some marketing experts, it is no longer enough to produce satisfied customers. True (moderate) p. 72 13. About 60 percent of dissatisfied customers don’t complain. False (moderate) p. 74 14. The customer development process begins with first-time customers. False (moderate) p. 74 15. The highest level of investment in customer relationship building is called partnership marketing. True (moderate) p. 75 16. The first step to reducing customer defection is to distinguish the causes of customer irritation and identify those that can be managed better. False (moderate) p. 75

39

17. American Airlines pioneered frequent flier programs to get more loyalty from its customers. Frequency marketing is an acknowledgement that a minority of customers provides a majority of profits. True (moderate) p. 76 18. Database marketing is the process of building, maintaining, and using a customer mailing list. False (moderate) p. 77 19. Data warehousing involves the use of sophisticated statistical and mathematical techniques to extract meaning from large customer data sets. False (moderate) p. 77 20. One problem with CRM programs is that not all customers want a “relationship” with the marketer. True (easy) p. 79

Multiple Choice Questions
21. In the opening scenario of Chapter 4, Caterpillar is successful with a new tractor introduction for all of the following reasons, EXCEPT: a. they used the Value Chain Accelerator Plan to manage parts flow. (moderate) p. 63 b. they surveyed hundreds of growers to identify their needs. c. they field-tested prototypes. d. they sought feedback from customers. e. they surveyed growers about buying criteria. 22. __________ is the difference between the prospective customer’s evaluation of all the benefits and costs of an offering and the perceived alternatives. a. Total customer cost b. Customer perceived value (moderate) p. 64 c. Customer delivered value d. Customer relationship management e. Total customer value 23. Which of the following is not a component part of total customer value? a. Product value. b. Services value. c. Psychic value. (moderate) p. 64 d. Personnel value. e. Image value. 24. About a year ago, Echo began renting her movies from Netflix. She perceived Netflix to be a better source because of the enhanced selection, the responsive customer service emails she has received in answer to her online queries, better pricing, and less effort compared to renting from the store in her town. Netflix has offered Echo better __________ than the local competition. a. total customer cost b. customer perceived value c. customer delivered value d. total customer value (moderate) p. 64 e. customer relationship management

40

25. Lowe’s home improvement stores strive to have nicer, more knowledgeable salespeople, a better product selection, and to maintain an impeccable image. These are all part of improving the offer via __________. a. reducing the buyer’s nonmonetary costs b. living up to the Lowe’s pledge c. reducing the product’s monetary costs to the buyer d. increasing the service value e. increasing total customer value (moderate) p. 65 26. __________ has been defined as a deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior. a. Loyalty (easy) p. 65 b. Satisfaction c. Value-delivery d. “Deep” satisfaction e. Delight 27. The __________ includes all the experiences the customer will have on the way to obtaining and using the marketing offering. a. value proposition b. value-delivery system (moderate) p. 65 c. psychic cost d. rational buying process e. customer proclivity to purchase 28. Buyers of Harley-Davidson motorcycles are promised more than just a vehicle, they also are assured that the motorcycles will work well, and maintain good re-sale value. Additionally, the Harley-Davidson brand represents “freedom” to many customers and potential customers. This latter idea is related to Harley’s __________. a. warranty b. brand promise c. core positioning (moderate) p. 66 d. guarantee of complete satisfaction e. value proposition 29. Which of the following is true? a. If marketers raise expectations too high, it won’t attract enough customers. b. If the company sets expectations too low, the buyer is likely to be disappointed. c. If the company sets expectations too low, exceeding buyer expectations becomes difficult. d. If marketers raise expectations too high, the buyer is likely to be disappointed. (moderate) p. 66 e. If marketers raise expectations too high, they will soon have many copycat offerings competing in the marketplace. 30. What are highly satisfied customers NOT likely to do? a. Stay loyal longer. b. Talk favorably about the brand. c. Be less price sensitive. d. Upgrade their service. e. Cost a bit more to serve. (moderate) p. 66

41

31. Which is NOT a difficulty of measuring customer satisfaction? a. Measurement tools are not sophisticated enough to measure satisfaction reliably. (difficult) p. 67 b. Customers may report some level of satisfaction for very different reasons. c. Different customers may define the term “satisfied” in very different ways. d. Completely satisfied could mean the same as very satisfied. e. Customer satisfaction may be strongly related to loyalty—but not always. 32. McDonald’s restaurants rank high in the quick service industry on getting orders right, something that is highly valued by quick service customers. This is an example of __________. a. conformance quality b. performance quality c. the “freedom from variation” standard d. none of the above e. More than one answer could be correct. (easy) p. 68 33. Communication of customer satisfaction results should be done internally (inside the company or organization) for which of the following reasons? a. Communicating satisfaction findings externally would have little marketing value. b. You should not communicate satisfaction findings internally for ethical reasons. c. To highlight good news and act on bad news. (moderate) p. 67 d. To satisfy upper management that all is going well. e. More than one of the above reasons is a correct reason for communicating satisfaction results internally. 34. The new BMW K1200 motorcycle is fast and smooth and pricy, when compared to the Suzuki SV650. The Suzuki is a competent, budget motorcycle which costs less than half the price of the BMW, has about half the horsepower, and has a “buzzy” ride above 95 miles per hour (the BMW will go 170+!). Both bikes deliver what their customers expect. Based on these facts, which is true? a. The Suzuki delivers higher performance quality. b. The BMW delivers higher conformance quality. c. German engineering is superior to Japanese engineering. d. Both bikes deliver conformance quality. (difficult) p. 68 e. Both companies participate in total quality management programs. 35. Which of the following is NOT true, when speaking of quality? a. Higher quality supports higher prices. b. Quality that raises customer satisfaction is generally related to higher profits. c. High quality can lower costs. d. Total Quality Management is an organization-wide program stressing continuous improvement. e. There is no correlation between relative product quality and company profitability. (moderate) p. 68 36. Marketers play all of the following roles in helping their companies define and deliver high-quality goods and services to target customers, EXCEPT: a. providing customer data to marketers with non-competing offers. (moderate) p. 68 b. correctly identifying customer needs. c. correctly filling customer orders. d. ensuring customer satisfaction. e. communicating customer needs to designers.

42

37. Which of the following is true of the customers? a. You should never “fire” your worst customers. b. The best hotel/motel customers outspend others by a ratio of 5 to 1. (moderate) p. 68 c. For every 20 customers, a company will make 80 percent more profit. d. The number of unprofitable customers is equal to the number of profitable ones. e. The best customers outspend others by a ratio of 5 to 1 in retailing. 38. A __________ is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the marketer’s cost stream of attracting, selling, and servicing that person, household, or company. a. good customer b. sales customer c. profitable customer (easy) p. 69 d. strong customer e. marketing accountant 39. What are the two solutions to unprofitable customers? a. Lower fees; reduce service. b. Lower fees; increase service. c. Raise fees; increase service. d. Raise fees; reduce service. (moderate) p. 69 e. There is only one solution to unprofitable customers—fire them! 40. __________ is best conducted with the tools of an accounting technique called __________. a. Activity-based costing; LIFO inventory management b. Serving unprofitable customers; customer profitability analysis c. Sensitivity analysis; activity-based costing d. LIFO inventory management; the Poisson distribution e. Customer profitability analysis; activity-based costing (moderate) p. 69 41. Which is true of competitive advantage? a. companies that hope to endure must continually invent new advantages. (moderate) p. 70 b Benjamin Franklin .first talked about by it. c. A customer advantage can be a customer advantage, even if customers do not value it. d. it is the ability to copy the best practices of other companies. e. being the fastest to the market guarantees competitive advantage, according to Porter’s Five Forces. 42. Taco Bell estimates that a loyal customer might be worth $11,000 to the company. This number stems from something called __________. a. (NPV)*(ROI) b. customer lifetime value (moderate) p. 70 c. the competitive present value of loyalty model (CPVLM) d. repeat purchase analysis e. brand equity

43

43. The more loyal the customers, the higher the customer equity. Which of the following is NOT a driver of customer equity? a. Brand equity. b. Relationship equity. c. Lifetime equity. (moderate) p. 71 d. Value equity. e. All of the above are drivers of customer equity. 44. __________ is the customer’s objective assessment of the utility of an offering based on perceptions of its benefits relative to its costs. a. Add-on selling equity b. Brand equity c. Acquisition equity d. Value equity (moderate) p. 71 e. Relationship equity 45. When USAA insurance fields a call from a new or existing customer, the telephone associate will often suggest additional services to meet the needs of the customer. This is related to which component of customer equity? a. Acquisition. b. Value equity. c. Retention. d. Relationship equity. e. Add-on selling. (moderate) p. 72 46. __________ is the process of managing detailed information about individual customers and carefully managing all customer “touch points” to maximize customer loyalty. a. Customer relationship management (easy) p. 72 b. Prospect identification c. Growing value equity d. Add-on selling e. Mass customization 47. In the morning, Moreno’s Restaurant is full of locals who seek inexpensive warm breakfasts. By lunchtime, the locals are all gone and the place fills with tourists who are hot, hungry, and thirsty after a day on the local beach. Owner Omar Moreno understands the dichotomy and has read about customer relationship management—he wants to serve both groups profitably. Omar is probably at what stage of the Peppers and Rogers’ framework for serving customers? a. Identifying his prospects and customers. b. Differentiating customers by need. c. Differentiating customers by their value to the restaurant. d. Interacting with individual customers to improve his knowledge about their needs and to build stronger relationships. e. Customizing products, services, and messages for each customer. (difficult) p. 72

44

48. Omar Moreno’s restaurant has a very different type of customer, depending on time of day and time of year. Omar is looking to re-vamp the menus to make more profit. What is probably the most important first customer relationship management step he can take toward his goal? a. Identify his prospects and customers. (moderate) p. 72 b. Differentiate customers by need. c. Differentiate customers by their value to the restaurant. d. Interact with individual customers to improve your knowledge about their needs and to build stronger relationships. e. Customize products, services, and messages for each customer. 49. Attracting, retaining, and growing customers is more difficult these days, for all of the following reasons EXCEPT: a. customers are smarter. b. customers are more demanding. c. customers are less forgiving. d. customers are approached by fewer and fewer competitive offers. (moderate) p. 72 e. it is no longer enough to “produce” satisfied customers. 50. Fidelity Investments puts through certain customers’ calls more quickly than others as a strategy for improving the value of the company’s customer base. While on the phone, the longer-waiting customers hear messages encouraging them to complete their transactions via the company Web site. This is an example of which kind of strategy? a. Reducing customer defection rate. b. Increasing the longevity of the customer relationship. c. Enhancing the potential growth potential of each customer. d. Managing phone queues via illegal and discriminatory practices. e. Making low-profit customers more profitable. (moderate) p. 73 51. Verizon loses about one-fourth of its customers a year to competitors. Verizon’s competitors suffer similar customer losses. What is this phenomenon called? a. Customer churn. (moderate) p. 73 b. The burnout rate. c. Sperm-to-worm conversion. d. The return phenomenon (TRP). e. Net loss analysis. 52. The best thing a company can do is make it __________ to complain. a. very difficult b. easy (easy) p. 74 c. moderately difficult d. a two-step process e. None of the above. Since complaints are not positive, companies should discourage them altogether. 53. Which of the following is NOT part of either of the two main ways to strengthen customer retention? a. Make switching involve high search costs. b. Deliver high customer satisfaction. c. Make leavers forfeit all future customer opportunities. (moderate) pp. 73-74 d. Make leavers lose their loyal-customer discounts or other privileges. e. Make leaving expensive financially.

45

54. Which is true in the customer-development process? a. A disqualified prospect is the same as an inactive customer. b. The ultimate customer is the one termed the “repeat” customer. c. Some partners go on to become members. d. Clients move on to become members and advocates if they remain active. (difficult) p. 74 e. The best customers never convert to inactive or ex-customers. 55. Which is true in the customer-development process? a. A disqualified prospect is the same as an inactive customer. b. The ultimate customer is the one termed the “repeat” customer. c. Some partners go on to become members. d. Advocates are the same as clients. e. A client becomes a member by joining a program that offers benefits. (moderate) p. 74 56. Which is true in the customer-development process? a. The two types of pre-customers are called suspects and prospects. (moderate) p. 74 b. The ultimate customer is the one termed the “repeat” customer. c. Some partners go on to become members. d. First-time customers may convert to prospects. e. The best customers never convert to inactive or ex-customers. 57. Which is NOT one of the five levels of investment in customer relationship building? a. Basic marketing. b. Retroactive marketing. (moderate) p. 75 c. Accountable marketing. d. Proactive marketing. e. Partnership marketing. 58. Which statement is probably the most important when considering customer retention? a. The impact of customer defection rate varies by industry. b. Reducing customer defection can be costly. c. Customer profit rate tends to increase over the life of the retained customer. (difficult) p. 74 d. Customer retention management is often the job of the marketing department. e. Repeat customers are easier to understand than are first-time customers. 59. Which is the first step to reducing customer defection? a. Define and measure the retention rate. (easy) p. 75 b. Distinguish among the cause of attrition and identify those that can be better managed. c. Estimate lost profits that result from lost customers. d. Figure out how much it would cost to reduce the defection rate. e. Listen to customers. 60. Which is the probably the most important step when trying to reduce the customer defection rate? a. Define and measure the retention rate. b. Distinguish among the cause of attrition and identify those that can be better managed. c. Estimate lost profits that result from lost customers. (difficult) p. 76 d. Figure out how much it would cost to reduce the defection rate. e. Listen to customers.

46

61. Wal-Mart has a high number of customers and sells mostly low-margin goods. Their level of relationship marketing is probably __________. a. accountable b. proactive c. partnership d. unresponsive e. basic or reactive (moderate) p. 75 62. Independent bread route truck drivers sell their products to a limited number of retail outlets, such as convenience stores, and make frequent, personal deliveries of the goods. Their level of relationship marketing is probably __________. a. partnership (moderate) p. 75 b. accountable c. reactive d. proactive e. basic 63. Which airline started enhancing their marketing first with frequent flier programs? a. Hooters b. American (difficult) p. 76 c. Virgin d. Jet Blue e. Southwest 64. Frequency programs acknowledge that __________ of a company’s customers might account for __________ of its business. a. 30 percent; 50 percent b. most; most c. 20 percent; 80 percent (moderate) p. 76 d. less than 5 percent; nearly all e. 75 percent; a slight majority 65. Increasing the customer’s proclivity to repurchase can be accomplished by doing each of the following, EXCEPT: a. creating structural ties with the customer. b. creating long-term contracts. c. charging less for ongoing purchases. d. building in escalator clauses on pricing. (moderate) p. 77 e. turning the product into a long-term service. 66. Royale’s Plumbing Supply in Hartford, Alabama maintains its competitive edge with contracts against large competitors such as The Home Depot by knowing all his customers’ names and how their businesses are doing. This is an example of forming strong customer bonds through __________. a. adding financial benefits b. adding frequency programs c. adding structural ties d. adding long-term contracts e. adding social benefits (moderate) p. 76

47

67. __________ is an organized collection 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. a. A customer database (easy) p. 77 b. Database marketing c. A data “mine” d. A data warehouse e. A customer mailing list 68. All of the following are good uses of databases that companies compile, EXCEPT: a. identifying good prospects. b. drawing inferences about customer lifestyles. (moderate) p. 77 c. deepening customer loyalty by remembering preferences. d. reactivating through reminder promotional efforts. e. avoiding sending the same customers two similar offers but with varying prices. 69. Which would be a reason to invest in a customer relationship management system? a. When the product is a once-in-a-lifetime purchase, such as a grand piano. b. Where customers for the product show little brand loyalty. c. Where satisfied customers can convert into partners. (easy) p. 78 d. Where the product has a very small unit-sale amount, as with a candy bar. e. Where the cost of gathering data is high. 70. Which of the following is NOT a downside of database marketing and CRM? a. It requires a large, upfront investment. b. It is difficult to get all employees customer-oriented. c. Not all customers want a “relationship” with the company. d. Skilled CRM professionals are easily found in a marketplace full of underemployed information systems specialists. (moderate) pp. 78-79 e. The assumptions underlying CRM may not always hold.

Essay Questions
71. What do the concepts “total customer value” and “total customer cost” mean and how are they related? Use examples to illustrate your answer. Answer: Total customer value is the perceived monetary value of the bundle of economic, functional, and psychological benefits that customers expect from a given market offering. Although answers will differ, a meal at a restaurant nicely illustrates the idea: the purchased meal at one level provides the customer with calories (functional benefit), a nice experience out in which they are treated well (psychological benefit), and to the extent that the meal provides a reasonably good value for the money, the economic cost was acceptable too (economic benefit). Total customer cost is the bundle of costs that the customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering. An example might be a car purchase, in which the customer spends time and energy resources evaluating the possibilities (evaluating costs), spends time and financial resources purchasing (obtaining costs), time, energy, and financial resources driving the car (using resources), and time and energy resources selling the car once it is no longer desired (disposing costs).

48

The difference between total customer value and total customer cost (value minus costs) is called both the “customer perceived value” and the “customer delivered value” in the text. This is basically a benefits minus costs model (or cost-benefit analysis). (moderate) p. 64 72. Rhys runs a 10-room bed and breakfast on the Cardiff Bay Walk in Cardiff, Wales. If Rhys stresses having high customer satisfaction, how might he be rewarded by the B&B’s customers? Answer: Highly satisfied customers do a number of things that reward the marketer who takes the time. For example in the lodging industry, customers tend to stay longer (buy more), upgrade (get the better room), talk with other potential customers positively about the product (good word of mouth), and be less sensitive to pricing than other customers. Additionally, highly satisfied customers are less costly to serve (less towel service or other room maintenance, lower marketing costs, etc.), and may feel more comfortable offering quality suggestions to Rhys. All of these would tend to help Rhys’ business be more profitable. (moderate) p. 66 73. Zonkers Wrap Shack on Long Island has just been bought by a young, rich, retired Wall Street type. The new owner wants to make Zonkers stand out among the many competitors by being the highest quality restaurant. Explain at least five ways Zonkers quality could be measured. Answer: There are many answers, here are some possibilities: 1. Freedom from variation: Zonkers sandwiches could be considered to have high quality if they were all made to order (so many ounces of meat, cheese, condiments, etc.). 2. Conformance to requirements: Zonkers service could be considered to have high quality if they always had the sandwich ready within an expected time, say within 4½ minutes. 3. Satisfies stated or implied needs: Zonkers customers might define quality by great tasting food that never disappoints. 4. Satisfies stated or implied needs: Zonkers customers might define quality by how often the take out orders are correct. 5. Exceeds customer expectations: Zonkers customers might consider that the food being good, plus the owner learning their name goes beyond what they think they’re paying for, and hence feel they have experienced quality. (moderate) pp. 67–68 74. Why would you ever want to “fire” a customer? What are the other options? Answer: Some customers cost the company more then they produce in profits. A profitable customer is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling, and servicing that customer. This cannot be determined by just one transaction, normally, note that the definition includes a stream of revenue (so, many transactions over time). An unprofitable customer is actually a profit drag on the company. If a marketer identifies a customer as unprofitable, they could avoid “firing” that customer by raising prices (for example, charging more fees or strongly encouraging more ATM use on bank accounts for smaller customers), or by trying to get that customer to purchase other products that boost their

49

profitability, or by reducing the level of service support for certain customers (as airlines do with lessfrequent fliers). (moderate) pp. 68–69 75. Rhys is manager of a large, privately held, luxury oceanfront hotel on the Cardiff Bay Walk in Cardiff, Wales. His bosses (the investor group) recently met with Rhys and conveyed their desire to implement a customer relationship management program. Rhys is sent to a CRM conference and comes home with a software product that is completely compatible with the hotel’s existing IT system. The software tracks customer “touch points.” Explain the idea of touch points and what they might be for a luxury hotel. Answer: A customer touch point is any occasion on which a customer encounters the brand or product—from actual experience to personal or mass communication to casual observation. For a hotel, customer touch points might include: making reservations; checking in or out; room service; the athletic center and pool; the business center; restaurants; etc. (easy) p. 72

Mini-Cases
Mini-Case 4-1 Arno owns a sandwich shop chain that is set to go from six shops to twelve over the next year. Because Arno’s stores will double and he is still just one person, he decides it’s time to get some kind of technological help with understanding and serving his customers better. 76. Refer to Mini-Case 4-1. At a foodservice trade show in Seattle, Arno finds an affordable softwarebased system that will help him create an Arno’s Discount Club, by managing detailed information about individual customers, such as their zip code and buying patterns. Arno’s new system is an example of __________. a. customer relationship management (easy) p. 72 b. prospect identification c. growing value equity d. add-on selling e. mass customization 77. Refer to Mini-Case 4-1. An independent baker who provides Arno with all his rolls and other bread products would like to grow her business along with Arno. Arno and the baker would be characterized as having the __________ level of relationship marketing. a. partnership (moderate) p. 75 b. accountable c. reactive d. proactive e. basic 78. Refer to Mini-Case 4-1. With the information Arno is able to gather about his customers, he might profitably use his customer database for all of the following EXCEPT: a. matching offers to a specific customer. b. drawing inferences about customer lifestyles. (moderate) p. 78 c. deepening customer loyalty by remembering preferences. d. reactivating through reminder promotional efforts. 50

e. avoiding sending the same customers two similar offers but with varying prices. Mini-Case 4-2 Ahn’s antiques business has been greatly affected by her move to an online store two years ago. Her sales have quadrupled and she has been able to hire a full-time, online customer liaison that helps her with both buying and selling, as well as Web site maintenance, and is in her own right, an antiques expert. 79. Refer to Mini-Case 4-2. Long-time customer Bunny began preferring Ahn’s Online store and now makes most of her purchases through that channel. She perceived Ahn’s Online to be a better source because of the enhanced selection, the responsive emails she has received in answer to her queries, better pricing, and less effort compared to the travel involved in “old school’ antiquing. Ahn’s Online has offered Bunny a better __________ than did the prior channel. a. total customer cost b. customer perceived value c. customer delivered value d. total customer value (moderate) p. 64 e. customer relationship management 80. Refer to Mini-Case 4-2. Ahn’s __________ includes all the experiences her customers have on the way to obtaining and using the antiques. a. value proposition b. value-delivery system (moderate) p. 65 c. psychic cost d. rational buying process e. customer proclivity to purchase 81. Refer to Mini-Case 4-2. As a result of being highly satisfied, what is Bunny NOT likely to do? a. Stay loyal to Ahn’s. b. Talk favorably about Ahn’s with her antique friends. c. Be less sensitive to Ahn’s prices. d. Buy more products from Ahn. e. Cost a bit more for Ahn to serve. (moderate) p. 66

51


								
To top