Test Bank for Marketing Management 14th Edition by Kotler

Transcription

1 Link full download: Test Bank for Marketing Management 14th Edition by Kotler Marketing Management, 14e (Kotler/Keller) Chapter 5 Creating Long-Term Loyalty Relationships 1) Which of the following is true for the modern company organization chart? A) Frontline employees are less important than top management. B) Customers are at the top of the pyramid. C) Top management is at the top of the pyramid. D) Customers are less important than middle management. E) Frontline employees are at the top of the pyramid. Answer: B Page Ref: 124 AACSB: Reflective thinking 2) In the modern customer-oriented organizational chart, which of the following is considered to be at the top of the organizational pyramid? A) sales B) top management C) front-line people D) customers E) middle management

2 Answer: D Page Ref: 124 3) In a modern customer-oriented organization chart, the of an organization immediately follow the customer segment. A) top management B) marketing department C) middle management D) frontline people E) lower management Answer: D Page Ref: 124 4) is the difference between the prospective customer s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. A) Perceived usefulness B) Failure avoidance rate C) Total customer benefit D) Customer-perceived value E) Competitors market share rate Answer: D Page Ref: 125

3 5) 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) customer profitability analysis D) customer equity E) customer lifetime value Answer: A Page Ref: 125 6) is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering. A) Total customer cost B) Total customer benefit C) Total benefits of ownership D) Value proposition E) Value delivery system Answer: B Page Ref: 125

4 7) The bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering is called the. A) activity-based cost B) customer profitability analysis C) total customer cost D) product life-cycle cost E) direct product profitability Answer: C Page Ref: 125 8) Which of the following is true for customer-perceived value? A) It is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a product. B) It is the difference between the prospective customer s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. C) It is the perceived bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering. D) It is the net present value of the stream of future profits expected over the customer s lifetime purchases. E) It is the process of investigating the hierarchy of attributes consumers examine in choosing a brand if they use phased decision strategies. Answer: B

5 Page Ref: 125 9) Which of the following is the first step in customer value analysis? A) Examine how customers in a specific segment rate the company s performance. B) Assess the company s and competitors performances on the different customer values against their rated importance. C) Identify the major attributes and benefits that customers value. D) Monitor customer values over time. E) Assess the quantitative importance of the different attributes and benefits. Answer: C Page Ref: ) The final step of customer value analysis is to. A) identify the major attributes and benefits that customers value B) assess the company s and competitors performances on the different customer values against their rated importance C) examine how customers in a specific segment rate the company s performance D) monitor customer values over time E) assess the quantitative importance of the different attributes and benefits Answer: D Page Ref: 126

6 11) Cell phone manufacturer LZT has to choose between two options for sourcing parts: Japan-based Keiko Inc. and U.S.-based Global Tech. How can Keiko reduce the total customer cost for LZT? A) absorbing some risk by offering a warranty B) improving the functional aspects of the products C) augmenting the psychological benefits of the products D) training service personnel to improve their skills E) investing in brand building for the products Answer: A Page Ref: 126 Difficulty: Moderate 12) can be 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) Value proposition B) Loyalty C) Satisfaction D) Respect E) Customer value Answer: B Page Ref: ) TBS Bikes has recently introduced a series of bikes called Surami. The core positioning of TBS Bikes is speed. Surami is a five-gear bike and apart from speed,

7 the company promises to include other features such as safety, good performance, and pollution control features. This describes the of the bike. A) total customer cost B) customer-perceived value C) value-delivery system D) value proposition E) total customer benefit Answer: D Page Ref: 127 Difficulty: Moderate 14) A company s includes all the experiences the customer will have on the way to obtaining and using the offering. A) value proposition B) value delivery system C) customer-value analysis D) total customer benefit E) total customer cost Answer: B Page Ref: 127

8 15) Sammy s is a fast food chain that offers burgers, sandwiches, and shakes. It focuses its marketing efforts on all the experiences the customers will have on the way to obtaining their food order and eating it. Hence, Sammy s is focusing its marketing efforts on its. A) horizontal marketing system B) cost versus benefit system C) consumption system D) marketing channel system E) value delivery system Answer: E Page Ref: 127 Difficulty: Moderate 16) Total customer satisfaction is measured based on the relationship of. A) expected value and total customer benefit B) perceived performance and expectation C) advertised outcomes and real outcomes D) past experience and present experience E) customer attitude and salesperson s attitude Answer: B Page Ref: 128 AACSB: Reflective thinking

9 17) Which of the following is true for customer satisfaction? A) Satisfaction is a deeply held commitment to rebuy or repatronize a preferred product despite situational influences. B) Consumers often form more favorable perceptions of a product with a brand that is new. C) The ultimate goal of a customer-centered firm is to create high customer satisfaction. D) Only increased customer satisfaction can help a company increase its profits. E) Greater customer satisfaction has also been linked to higher returns and lower risk in the stock market. Answer: E Page Ref: ) can track customer satisfaction directly, measure repurchase intention and also gauge a consumer s willingness to recommend the company and brand to others. A) Periodic surveys B) Mystery shoppers C) Customer loss rates D) Customer focus statements E) Sales summary reports Answer: A Page Ref: 129

10 19) Field Grocery wants to learn the strengths and weaknesses in customer service at all the Field Grocery stores. Which of the following methods can it use for this? A) group buyers B) buyer brokers C) mystery shoppers D) personal shoppers E) buying agents Answer: C Page Ref: ) Of customers who register a complaint,. A) all will do business with the company again because they are unwilling to dedicate the effort required to find another vendor B) none will do business with the company again C) customers whose complaints are satisfactorily resolved are more likely to provide publicity than those who are dissatisfied D) the speed of resolution has no impact on the likelihood of repeat business E) some will do business with the company again if their complaint is resolved Answer: E Page Ref: ) Which of the following is the best method of recovering customer goodwill?

11 A) sending service people to conduct door-to-door surveys B) contacting the complaining customer as quickly as possible C) identifying prospective customers from the customer database D) customizing products according to individual customer need E) defining and measuring the customer retention rate Answer: B Page Ref: ) is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. A) Performance B) Value C) Quality D) Customer retention E) Customer loyalty Answer: C Page Ref: ) When two brands of the same basic product deliver their respective promised quality, they are delivering. A) performance quality B) conformance quality

12 C) unique quality D) accuracy quality E) customer support Answer: B Page Ref: ) Rade and Talion are competitors in the business of manufacturing wrist watches. While Rade promises to deliver design and quality to its customers, Talion promises to deliver durability and cost effectiveness. When both these companies deliver their respective promised qualities, they are delivering. A) performance quality B) customer support C) unique quality D) accuracy quality E) conformance quality Answer: E Page Ref: 131 Difficulty: Moderate 25) The rule reflects the idea that. A) 20% of the company s profits are generated by the top 80% of customers B) the top 20% of customers are highly satisfied and 80% of customers will recommend the company to a friend

13 C) 20% of customers are unprofitable, and 80% make up a company s profits D) the top 20% of customers often generate 80% of the company s profits E) any new product will be accepted by 20% of the customers immediately, but 80% of the customers will be up for grabs throughout the product s life cycle Answer: D Page Ref: 132 Objective: 2 26) A profitable customer. A) yields a cost stream that exceeds by an acceptable amount his revenue stream B) yields a revenue stream that exceeds the company s cost stream C) yields a cost stream that exceeds the company s revenue stream D) yields a revenue stream that exceeds by an acceptable amount his cost stream E) yields a revenue stream that equals the company s cost stream Answer: B Page Ref: 133 Objective: 2 27) A 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. A) prospector B) profitable customer C) market challenger

14 D) market nicher E) pioneer customer Answer: B Page Ref: 133 Objective: 2 28) Customer profitability analysis (CPA) is best conducted with the tools of an accounting technique called. A) input-output analysis B) factor analysis C) revenue-based costing D) activity-based costing E) future date costing Answer: D Page Ref: 133 Objective: 2 AACSB: Reflective thinking 29) Which of the following is true for activity-based costing (ABC)? A) ABC considers the real costs associated with each product. B) With ABC, the company can estimate all costs coming from the customer, less revenue. C) The tools of ABC can be used to conduct customer profitability analysis.

15 D) It identifies the costs of products and services based on the revenue they generate. E) ABC allocates indirect costs in proportion to direct costs. Answer: C Page Ref: 133 Objective: 2 30) describes the net present value of the stream of future profits expected over the customer s lifetime purchases. A) Activity-based costing B) Customer lifetime value C) Customer value analysis D) Customer-perceived value E) Customer profitability analysis Answer: B Page Ref: 134 Objective: 2 31) The aim of customer relationship management is to produce high customer. A) integrity B) loyalty C) innovation D) liability

16 E) equity Answer: B Page Ref: ) is the process of carefully managing detailed information about individual customers and all customer touch points to maximize loyalty. A) Customer relationship management B) Customer lifetime value C) Customer profitability analysis D) Customer satisfaction analysis E) Customer-value delivery Answer: A Page Ref: ) A customer is any occasion on which a customer encounters the brand and product from actual experience to personal or mass communications to casual observation. A) touch point B) point of order C) point of difference D) pivot point E) point of parity

17 Answer: A Page Ref: ) A customer touch point for Abacus Airlines would be an item such as. A) ease of access to the airport B) a mechanic s ability to service the airplanes C) the reservations desk D) the value of air travel versus surface transportation E) competency of a travel agent Answer: C Page Ref: 135 Difficulty: Moderate 35) Rachel and Josh are on vacation in Hawaii. When they arrived at the hotel, they were offered chilled juice. Their check-in formalities were handled by the staff. When they entered their room, they saw that chocolates had been placed on the pillows and a flower arrangement on the table. The hotel s actions are an example of. A) customer lifetime value B) customer perceived value C) customer value analysis D) customer profitability analysis

18 E) a customer touch point Answer: E Page Ref: 135 Difficulty: Moderate 36) Customer relationship management enables companies to provide excellent real-time customer service through the effective use of. A) reports from mystery shoppers B) survey data from customers who have defected C) market research D) individual account information E) demographic trend data Answer: D Page Ref: 135 AACSB: Reflective thinking 37) is based on the premise that marketers can no longer use interruption marketing via mass media campaigns. A) Relationship marketing B) Permission marketing C) Database marketing D) Internet marketing E) Horizontal marketing

19 Answer: B Page Ref: 136 AACSB: Reflective thinking 38) is the practice of sending messages only when consumers express a willingness to become more involved with the brand. A) Relationship marketing B) Permission marketing C) Cause marketing D) Defensive marketing E) Horizontal marketing Answer: B Page Ref: AACSB: Reflective thinking 39) Which of the following is a step in one-to-one marketing that can be adapted for CRM marketing? A) Identify the lifetime value of lost customers. B) Define and measure the retention rate of customers. C) Offer the lowest price for a particular product. D) Distinguish the causes of customer attrition. E) Customize products, services, and messages to each customer. Answer: E

20 Page Ref: ) Another term for high customer is customer churn. A) retention B) defection C) value D) perception E) belief Answer: B Page Ref: ) Which of the following can a company do to reduce defection? A) Attract new customers to try out the company s products. B) Increase customer lifetime value by increasing the non-monetary costs of products. C) Enhance the growth potential of existing customers through cross-selling and upselling. D) Distinguish the causes of customer attrition and identify those that can be managed better. E) Make low-profit customers more profitable or terminate the relationship. Answer: D

21 Page Ref: 140 The Marketing Funnel (Scenario) Amy and Jack were loyal customers of GreenFoods, a local grocery store. However, after a couple of incidents where they had to return products that were stale and out of date, the couple decided to try out VeggiesNmore, a chain store that recently opened in town. Both Amy and Jack must move through each stage in the marketing funnel before becoming loyal customers. 42) Jack has shopped at VeggiesNmore. He was happy with the experience and thought that this could be an alternative to GreenFoods. However, he is also keen to try out other stores in the neighborhood. He is in the stage of the marketing funnel as far as shopping at VeggiesNmore is concerned. A) aware B) open to trial C) most often used D) nonrejecter E) regular user Answer: D Page Ref: 140 Difficulty: Moderate 43) Amy is in the aware stage of the marketing funnel when she says. A) she can try shopping at VeggiesNmore while simultaneously exploring other stores in the neighborhood B) she was informed about VeggiesNmore by her colleague at work C) she regularly shops from VeggiesNmore

22 D) she shops from VeggiesNmore as far as the store is easily accessible E) she was happy with the experience of shopping at VeggiesNmore Answer: B Page Ref: 140 Difficulty: Moderate 44) Satisfied customers constitute the company s. A) customer relationship capital B) customer churn C) target audience D) high-value customers E) customer touch points Answer: A Page Ref: ) Sapphire Toys actually sells more than toys. It also sells branded clothing, music CDs, and books for children. 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 C) enhancing the growth potential of each customer through cross-selling D) making low-profit customers more profitable E) terminating low-profit customers

23 Answer: C Page Ref: 141 Difficulty: Moderate 46) LifeTime Insurance screens its customers and tries to get unprofitable customers to buy services from competitors. This is an example of. A) trying to increase the retention rate for low-profit customers B) terminating the relationship with low-profit customers C) enhancing the growth potential of each customer through up-selling D) increasing the longevity of the customer relationship E) reducing the rate of customer defection Answer: B Page Ref: 141 Difficulty: Moderate 47) Many banks and phone companies now charge fees for once-free services to ensure minimum customer revenue levels. This helps the banks to. A) reduce the rate of customer defection B) make low-profit customers more profitable C) enhance the growth potential for each customer through cross-selling D) increase the longevity of the customer relationship E) focus disproportionate effort on high-value customers Answer: B

24 Page Ref: 141 AACSB: Reflective thinking 48) Which of the following is an example of focusing disproportionate effort on high-profit customers? A) In addition to bicycles, 2Wheels sells biking gear such as helmets, bottles, jackets and other accessories. B) 2Wheels has a club for its regular customers, organizing cycling events and parties for them. C) Though 2Wheels previously offered free delivery, it now charges for deliveries made outside the city. D) 2Wheels allows existing customers to upgrade to a newer model at less than the sticker price by trading in their older model. E) 2Wheels encourages customers to send in their suggestions for product improvement. Answer: B Page Ref: 141 Difficulty: Moderate 49) Which of the following is an example of enhancing the growth potential of each customer through cross-selling? A) In addition to bicycles, 2Wheels stocks biking gear such as helmets, bottles, jackets and other accessories. B) 2Wheels has a club for its regular customers, organizing cycling events and parties for them. C) Though 2Wheels previously offered free delivery, it now charges for deliveries made outside the city.

25 D) 2Wheels allows existing customers to upgrade to a newer model at less than the sticker price by trading in their older model. E) 2Wheels encourages customers to send in their suggestions for product improvement. Answer: A Page Ref: 141 Difficulty: Moderate 50) Which of the following is a policy a store can adopt to make low-profit customers more profitable? A) 2Wheels sends birthday greetings to its best customers and gives them discounts on merchandise. B) 2Wheels has a club for its regular customers, organizing cycling events and parties for them. C) Though 2Wheels previously offered free delivery, it now charges for deliveries made outside the city. D) 2Wheels allows existing customers to upgrade to a newer model at less than the sticker price by trading in their older model. E) 2Wheels encourages customers to send in their suggestions for product improvement. Answer: C Page Ref: 141 Difficulty: Moderate 51) Companies provide rewards to customers who buy often and in substantial amounts. These reward schemes are referred to as. A) benefit programs

26 B) frequency programs C) satisfaction programs D) profitability programs E) quality programs Answer: B Page Ref: ) Which of the following gains the most benefit from introducing a frequency program? A) the first company to introduce a frequency program in an industry B) the fast follower, the second to introduce a 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: A Page Ref: 142 AACSB: Reflective thinking 53) Club membership programs that are open to everyone who purchases a product or service. A) are more powerful long-term loyalty builders than limited-membership clubs. B) will not help a company attract customers from competitors

27 C) prevent those with only a fleeting interest in a company s products from joining D) are useful for building a database of customers but are not very good as longterm loyalty builders E) are useless unless there are fees and membership conditions Answer: D Page Ref: ) Southwest Airlines offers a Rapid Rewards program that allows customers to count flights they have taken toward free future flights. This is an example of a(n). A) cross-selling program B) value delivery system C) club membership program D) activity-based costing program E) up-selling program Answer: C Page Ref: ) Some customers inevitably become inactive or drop out. The challenge for marketers is to reactivate them through strategies. A) win-back

28 B) retention C) defection D) sell-out E) recuperation Answer: A Page Ref: 143 Objective: 4 56) A is an organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships. A) customer database B) customer mailing list C) customer-performance scorecard D) customer profitability analysis E) customer-value hierarchy Answer: A Page Ref: 143 Objective: 4 57) 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

29 B) data mining C) database marketing D) participatory marketing E) permission marketing Answer: C Page Ref: 143 Objective: 4 58) A is simply a set of names, addresses, and telephone numbers. A) customer database B) customer mailing list C) customer-performance scorecard D) customer profitability analysis E) customer-value hierarchy Answer: B Page Ref: 143 Objective: 4

30 Difficulty: Easy 59) Using the information in his company s 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 rejection list D) bibliographic database E) customer-value hierarchy Answer: A Page Ref: 144 Objective: 4 60) Through, marketing statisticians can extract useful information about individuals, trends, and segments from the mass of data. A) data governance B) data modeling C) data mining D) data maintenance E) data marketing Answer: C Page Ref: 144 Objective: 4

31 61) 2Wheels conducts exhaustive customer surveys to discover customer preferences and attitudes towards the brand. Sally uses cluster analysis to classify the data and help the company determine the trends in the information. Sally is using the technique of. A) data management B) data marketing C) data governance D) data accumulation E) data mining Answer: E Page Ref: 144 Objective: 4 62) Susan Lefferts company advertises widely. Ms. Lefferts uses business reply cards attached to her company s magazine ads to build her company s database. In which of the following ways would Ms. Lefferts most likely 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: E Page Ref: 144 Objective: 4

32 Difficulty: Moderate 63) Phil Langston has just ordered a number of expensive executive gifts that he will be sending as an appreciation token 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 D) to avoid serious customer mistakes E) to beat the competition to a sale Answer: C Page Ref: 144 Objective: 4 Difficulty: Moderate 64) The skillful use of has made catalog house Fingerhut one of the nation s largest direct-mail marketers. A) everyday low prices B) expanded home delivery options C) database marketing D) under-the-line promotions E) retailer alliances Answer: C Page Ref: 144

33 Objective: 4 65) Which of the following is true for customer relationship marketing? A) 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 train 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: B Page Ref: 145 Objective: 4 AACSB: Reflective thinking 66) Which of the following is not conducive to database marketing? A) Rushbury Theater relies on the generosity of donors to keep functioning. B) Kenilworthy retails luxury handbags and leather accessories to a select clientele. C) 2Wheels sells its most profitable products to repeat customers. D) Uncle Jim s sells its range of snacks in stores throughout the country. E) PetZone offers obedience classes, a doggie daycare and other services for pets in the Manhattan area. Answer: D Page Ref: 145 Objective: 4

34 Difficulty: Moderate 67) In which of the following cases is building a database worthwhile for the company? A) Clare s creates personalized sculptures for special occasions. B) Sales of Clarity soap have fallen over the past few months in all regions. C) 2Wheels sells its most profitable products to repeat customers. D) Uncle Jim s sells its range of snacks in stores throughout the country. E) Ready-to-wear clothes brand Zeep targets the teen and tween market throughout the U.S. Answer: C Page Ref: 145 Objective: 4 Difficulty: Moderate 68) In which of the following cases is building a database worthwhile for the company? A) where the product is a once-in-a-lifetime purchase B) where customers show little loyalty to a brand C) where the company has a long relationship with its customers D) where the unit sale is very small E) where the cost of gathering the information is high Answer: C Page Ref: Objective: 4

35 69) Which of the following is most likely to use database marketing? A) an airline B) a candy bar manufacturer C) a fast-food chain D) a toothpaste manufacturer E) a hair stylist Answer: A Page Ref: 145 Objective: 4 Difficulty: Moderate 70) Which of the following statements demonstrates behavioral loyalty towards a brand? A) 2Wheels has very customer-friendly return policies for its products. B) I always buy 2Wheels products when I m looking for bike accessories. C) Most of my friends agree that 2Wheels is the best place for durable biking gear. D) 2Wheels has the friendliest customer service people I ve ever met. E) I think that 2Wheels products are the highest-quality products in their price range. Answer: B Page Ref: 146 Objective: 4

36 Difficulty: Difficulty: Moderate

37 71) Managers who believe the customer is the company s only true profit center consider the traditional organization chart to be obsolete. Answer: TRUE Page Ref: ) The modern customer-oriented organization chart places top management at the top of the pyramid. Answer: FALSE Page Ref: 124 AACSB: Reflective thinking 73) Customer-perceived value is based on the difference between benefits the customer gets and costs he or she assumes for different choices. Answer: TRUE Page Ref: ) Total customer cost consists of only the non-monetary costs in evaluating, obtaining, using, and disposing of the given market offering. Answer: FALSE Page Ref: 125

38 75) Customer-perceived value is the perceived monetary value of all the purchases a customer makes on an annual basis. Answer: FALSE Page Ref: ) A seller who is at a disadvantage has two alternatives: decrease total customer benefit or increase total customer cost. Answer: FALSE Page Ref: ) The value proposition is stated in the price of a product and readily recognized by the average consumer. Answer: FALSE Page Ref: ) The value delivery system includes all the experiences the customer will have on the way to obtaining and using the offering.

39 Answer: TRUE Page Ref: ) The value proposition is also known as the core positioning of the offering. Answer: FALSE Page Ref: ) Loyalty is a person s feelings of pleasure or disappointment that result from comparing a product s perceived performance to expectations. Answer: FALSE Page Ref: 128 AACSB: Reflective thinking 81) Customer satisfaction is the only way by which a firm can increase its profitability. Answer: FALSE Page Ref: 128

40 82) Consumers expectations result exclusively from past buying experiences. Answer: FALSE Page Ref: ) The best thing a company can do in the face of company mistakes is to discourage the customer from complaining. Answer: FALSE Page Ref: 131 AACSB: Reflective thinking 84) Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Answer: TRUE Page Ref: ) Conformance quality and performance quality are identical in the marketing sense. Answer: FALSE Page Ref: 131

41 86) Two products with very different performance qualities can have the same conformance quality if both products deliver their respective promised quality. Answer: TRUE Page Ref: ) 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 the customer. Answer: TRUE Page Ref: 133 Objective: 2 88) A customer s profitability is judged on the basis of the lifetime stream of revenue and cost, not the profit from a particular transaction. Answer: TRUE Page Ref: 133 Objective: 2 AACSB: Reflective thinking 89) Unprofitable customers who defect to a competitor should be encouraged to do so. Answer: TRUE

42 Page Ref: 133 Objective: 2 AACSB: Reflective thinking 90) Customer profitability analysis is best conducted with the tools of an accounting technique called activity-based costing. Answer: TRUE Page Ref: 133 Objective: 2 91) Activity-based costing tries to identify the real costs associated with serving each customer. Answer: TRUE Page Ref: 133 Objective: 2 92) Activity-based costing does not consider indirect, variable and overhead costs. Answer: FALSE Page Ref: 133 Objective: 2 AACSB: Reflective thinking 93) Customer lifetime value describes the net present value of the stream of future profits expected over the customer s lifetime purchases.

43 Answer: TRUE Page Ref: 134 Objective: 2 94) The aim of customer relationship management is to keep the costs of meeting and tracking consumers as low as possible. Answer: FALSE Page Ref: 135 AACSB: Reflective thinking 95) A customer touch point is the time when the customer makes a purchase. Answer: FALSE Page Ref: ) Permission marketing presumes that consumers know what they want. Answer: TRUE Page Ref: 137 AACSB: Reflective thinking

44 97) All companies should practice one-to-one marketing. Answer: FALSE Page Ref: ) Customer churn is how rapidly a store can move customers through its checkout facility or process. Answer: FALSE Page Ref: ) For a magazine, subscription renewal rate is a good measure of retention. Answer: TRUE Page Ref: ) A company should try to retain the customer only as long as the cost to discourage defection is lower than the lost profit. Answer: TRUE Page Ref: ) Profit rate tends to decrease over the life of the retained customer due to increased purchases, referrals, price premiums, and increased operating costs to service.

45 Answer: FALSE Page Ref: ) The marketing funnel identifies the profitability of consumers at each stage in the decision process. Answer: FALSE Page Ref: ) Focusing disproportionate effort on high-profit customers will lead to lower customer profitability for those customers. Answer: FALSE Page Ref: ) Frequency programs are designed to reward customers who buy frequently and in substantial amounts. Answer: TRUE Page Ref: 142 AACSB: Reflective thinking

46 105) Clubs that are open to everyone who purchases a product or service are good for building a customer database. Answer: TRUE Page Ref: ) It s often easier to reattract ex-customers than to find new ones because the company knows their names and histories. Answer: TRUE Page Ref: 143 AACSB: Reflective thinking 107) A customer database is simply a listing of a customer s name, address, and phone number for credit reference. Answer: FALSE Page Ref: 143 Objective: 4 108) Cluster analysis is a statistical technique that can be employed in data mining. Answer: TRUE Page Ref: 144 Objective: 4

47 109) Building a customer database is not recommended when the product is a oncein-a-lifetime purchase. Answer: TRUE Page Ref: 145 Objective: 4 110) Loyal customers are the best ambassadors for a brand. Answer: FALSE Page Ref: 146 Objective: 4 111) Compare and contrast the typical traditional organization chart for an organization against the modern customer-oriented organization chart. Answer: The traditional organization chart is a pyramid with the president at the top, management in the middle, and frontline people and customers at the bottom. In this case, the top management is the most important part of an organization. Managers who believe the customer is the company s only true profit center consider the traditional organization chart obsolete. In the modern customer-oriented organization chart, customers are at the top, followed by frontline people, then middle management, and, lastly, top management. Page Ref: ) Explain customer-perceived value.

48 Answer: Customer-perceived value (CPV) is the difference between the prospective customer s evaluation of all the benefits and all the costs of an offering and the perceived alternatives. Total customer benefit is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering because of the product, service, people, and image. Total customer cost is the perceived bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering, including monetary, time, energy, and psychological costs. Customer-perceived value is thus based on the difference between benefits the customer gets and costs he or she assumes for different choices. The marketer can increase the value of the customer offering by raising economic, functional, or emotional benefits and/or reducing one or more costs. Page Ref: ) What are the steps in a customer value analysis? Answer: Managers conduct a customer value analysis to reveal the company s strengths and weaknesses relative to those of various competitors. The steps in this analysis are: 1. Identify the major attributes and benefits customers value. 2. Assess the quantitative importance of the different attributes and benefits. 3. Assess the company s and competitors performances on the different customer values against their rated importance. 4. Examine how customers in a specific segment rate the company s performance against a specific major competitor on an individual attribute or benefit basis. 5. Monitor customer values over time. Page Ref: ) Explain total customer satisfaction.

49 Answer: In general, satisfaction is a person s feelings of pleasure or disappointment that result from comparing a product s perceived performance (or outcome) to expectations. If the performance falls short of expectations, the customer is dissatisfied. If it matches expectations, the customer is satisfied. If it exceeds expectations, the customer is highly satisfied or delighted. Customer assessments of product performance depends on many factors, especially the type of loyalty relationship the customer has with the brand. Consumers often form more favorable perceptions of a product with a brand they already feel positive about. Page Ref: ) What are the measurement techniques for monitoring satisfaction? Answer: Many companies are systematically measuring how well they treat customers, identifying the factors shaping satisfaction, and changing operations and marketing as a result. Periodic surveys: These can track customer satisfaction directly and ask additional questions to measure repurchase intention and the respondent s likelihood or willingness to recommend the company and brand to others. Customer loss rate: Companies need to monitor their competitors performance too. They can monitor their customer loss rate and contact those who have stopped buying or who have switched to another supplier to find out why. Mystery shoppers: Companies can hire mystery shoppers to pose as potential buyers and report on strong and weak points experienced in buying the company s and competitors products. Managers themselves can enter company and competitor sales situations where they are unknown and experience firsthand the treatment they receive, or they can phone their own company with questions and complaints to see how employees handle the calls. Page Ref: ) Identify ways in which companies facing customer complaints can recover customer goodwill.

50 Answer: Given the potential downside of having an unhappy customer, it is critical that marketers deal with negative experiences properly. Beyond that, the following procedures can help to recover customer goodwill. 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 customer s disappointment 4. Use customer-service people who are empathic. 5. Resolve the complaint swiftly and to the customer s satisfaction. Page Ref: ) What technique is used for customer profitability analysis? Answer: Customer profitability analysis (CPA) is best conducted with the tools of an accounting technique called activity-based costing (ABC). ABC accounting tries to identify the real costs associated with serving each customer the costs of products and services based on the resources they consume. The company estimates all revenue coming from the customer, less all costs. With ABC, the costs should include the cost not only of making and distributing the products and services, but also of taking phone calls from the customer, traveling to visit the customer, paying for entertainment and gifts all the company s resources that go into serving that customer. ABC also allocates indirect costs like clerical costs, office expenses, supplies, and so on, to the activities that use them, rather than in some proportion to direct costs. Both variable and overhead costs are tagged back to each customer. Page Ref: 133 Objective: 2

51 118) Explain permission marketing. Answer: Permission marketing is the practice of marketing to consumers only after gaining their expressed permission and is based on the premise that marketers can no longer use interruption marketing via mass media campaigns. Marketers can develop stronger consumer relationships by respecting consumers wishes and sending messages only when they express a willingness to become more involved with the brand. However, permission marketing, like other personalization approaches, presumes consumers know what they want. Page Ref: ) 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. Answer: The three steps that a company can take to reduce defection 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. 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 Ref: ) 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. Answer: Winning companies improve the value of their customer base by excelling at the following five strategies:

52 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 5. Focusing disproportionate effort on high-value customers Page Ref: AACSB: Reflective thinking 121) What are the five problems that can prevent a company from using CRM effectively? Answer: Five main problems can prevent a firm from effectively using CRM. They are: 1. Some situations are just not conducive to database management. 2. Building and maintaining a customer database requires a large, well-placed investment in computer hardware, database software, analytical programs, communication links, and skilled staff. 3. It may be difficult to get everyone in the company to be customer oriented and use the available information. 4. Not all customers want a relationship with the company. 5. The assumptions behind CRM may not always hold true. Page Ref: Objective: 4 122) LZT is a cell phone manufacturer that designs its phones based on customer input. Once a new model is launched, the company monitors customer

53 feedback and uses negative reviews to improve the next model. LZT also handles customer queries at length, and customer service is considered to be the most important function in the company. Is LZT more likely to use a traditional or modern company organization? Answer: LZT is more likely to have a modern, customer-oriented company organization, as it gives great importance to customers. Page Ref: 124 Difficulty: Moderate 123) Cell phone manufacturer LZT has to choose between two options for sourcing parts: Japan-based Keiko Inc. and U.S.-based Global Tech. Though Keiko s products are priced lower than Global s, the non-monetary costs of doing business with Keiko may lead LZT to choose Global Tech. What can Keiko do to obtain LZT s order? Answer: Student answers may vary. Keiko can increase total customer benefit by improving economic, functional, and psychological benefits of its product, services, people, and image. It can reduce LZT s nonmonetary costs by reducing the time, energy, and psychological investment. It can also further reduce its product s monetary cost. Page Ref: 125 Difficulty: Moderate 124) Cell phone manufacturer LZT has to choose between two options for sourcing parts: Japan-based Keiko Inc. and U.S.-based Global Tech. How can Keiko reduce the total customer cost for LZT? Answer: Keiko can reduce the price or cost of ownership and maintenance, simplify the ordering and delivery process, or absorb some buyer risk by offering a warranty. Page Ref: 126

54 Difficulty: Moderate 125) Create a value proposition for cell phone manufacturer LZT. Answer: Student answers may vary. LZT s value proposition could include good quality, reliable battery life, excellent design and style. Page Ref: 127 Difficulty: Moderate 126) Shoe retail chain Berry s has noticed an increase in complaints about customer service at its stores and is beginning to lose customers to competitors. The company needs to identify the problems and rectify them. Give two methods Berry s can use to discover the problem. Answer: Periodic surveys can track customer satisfaction directly and ask additional questions about the quality of customer service. Berry s can hire mystery shoppers to pose as potential buyers and report on strong and weak points experienced in buying the company s and competitors products. Page Ref: 129 Difficulty: Moderate 127) Give an example of two products that have different performance quality but are of equal conformance quality. Answer: Student answers may vary. Performance quality is the quality of the product s attributes. Conformance quality is the extent to which the product delivers the performance quality promised to consumers. A Sony Ericsson mobile cell phone provides higher performance quality

55 than a Nokia. The Sony Ericsson mobile has more features and lasts longer than a Nokia mobile cell phone. Yet both would deliver the same conformance quality if both delivered their respective promised quality. Page Ref: 131 Difficulty: Moderate 128) Berry s is a chain of shoe stores. The company recently reviewed its customer relations strategy and suggested that the brand communication be consistent across all customer touch points. What are the various touchpoints for Berry s? Answer: Student answers may vary. Berry s touch points can include the stores sales staff, point-of-purchase advertising, the company Web site, the packaging of the products, the company s advertising and promotional messages. Page Ref: 135 Difficulty: Moderate 129) Give an example of how a hotel can generate customer loyalty at a customer touch point. Answer: Student answers may vary. An example of customer touch point would be when a hotel offers its guests something to drink upon arrival before they check in, or when the staff places chocolates on pillows and face towels twisted into the shape of animals on beds. Page Ref: 135 Difficulty: Moderate

56 130) Berry s is a chain of shoe stores. The marketing team suggested that the company use permission marketing instead of interruption marketing. How can this benefit the company? Answer: Student answers may vary. Using permission marketing, the practice of marketing to consumers only after gaining their expressed permission, Berry s can develop stronger consumer relationships by respecting consumers wishes and sending messages only when they express a willingness to become more involved with the brand. Page Ref: Difficulty: Moderate 131) Uncle Jim s is a brand of ready-to-eat snacks that is widely distributed in supermarkets and stores across the country. Should Uncle Jim s opt for one-to-one marketing? Give reasons for your answer. Answer: Student answers may vary. One-to-one marketing is unlikely to profit Uncle Jim s. 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 Ref: 137 Difficulty: Moderate 132) Bicycle store 2Wheels wants to maximize sales from each customer. The marketing team suggests that 2Wheels uses cross-selling techniques. How can the company implement this technique? Answer: 2Wheels can use cross-selling techniques by stocking products related to bicycles, such as cycling gear, bottles, lamps and other accessories.

57 Page Ref: ) Bicycle store 2Wheels notices that it has a high proportion of low-profit customers, but doesn t want to terminate the customer relationship. What can 2Wheels do to make these customers more profitable? Answer: 2Wheels can encourage unprofitable customers to buy more or in larger quantities, forgo certain features or services, or pay higher amounts or fees. It can also use cross-selling or up-selling techniques. Page Ref: ) To increase customer loyalty, 2Wheels wants to start a club for its dedicated customers, but wants to make sure that only members who are ready to participate in activities join the club. What can it do to ensure this? Answer: Student answers may vary. 2Wheels can institute membership fees and membership conditions to ensure that only members with a lasting interest join the club. Page Ref: ) The management of Keiko has learned that the company risks losing a longtime customer, LZT, to a competitor. How can Keiko make it more difficult for LZT to switch to another customer? Answer: Student answers may vary. Keiko can supply LZT with special equipment or computer links that help them manage orders, payroll, and inventory. Customers are less inclined to switch to another supplier when it means high capital costs, high search costs, or the loss of loyal-customer discounts.

58 Page Ref: 143 Objective: 4 136) Sara is the marketing manager of a small HR consultancy firm. She is in the process of implementing the use of a database to assist her company in its marketing efforts. List five ways in which she might be able to use the database for marketing efforts. Answer: Sara can use a database for marketing efforts in five ways. These include: (1) identifying prospects; (2) deciding which customers should receive a particular offer; (3) strengthening customer loyalty; (4) reactivating customer purchases; and (5) avoiding serious customer mistakes. Page Ref: Objective: 4 Difficulty: Moderate 137) CJ s is a clothes retailer that grew from a single store into a chain over a few years. The key service characteristic during CJ s early years was a personalized customer relationship, and the company continues to collect information about its customers and maintain a database. Recently, however, CJ s has been losing customers to competitors as the expansion has made it difficult to personalize services. How can CJ s use its customer database to reactivate customer purchases? Answer: CJ s can install automatic mailing programs that send out birthday or anniversary cards, Christmas shopping reminders, or off-season promotions. The company can use the database to make attractive or timely offers to its customers based on their preferences. Page Ref: 145 Objective: 4 Difficulty: Moderate