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Chapter 5:
Creating Customer Value, Satisfaction, and Loyalty GENERAL CONCEPT QUESTIONS
Multiple Choice
1.________ are adept at building customer relationships, not just products; they are
skilled in market engineering, not just product engineering.
a.Profit-centered companies
b.Customer-centered companies
c.Production-centered companies
d.Sales-centered companies
e.Promotion-centered companies
Answer: b Page: 139 Level of difficulty: Easy
2.The opening vignette on Washington Mutual indicates that, as the Washington
Mutual experience shows, successful marketers are the ones that fully ________.
a.understand promotional strategy
b.diversify their product line
c.divorce themselves from a production mentality
d.satisfy their customers
e.understand the sales concept
Answer: d Page: 140 Level of difficulty: Medium
3. In the modern customer-oriented organizational chart, which of the following is
considered to be at the top of the organizational pyramid?
a.Sales are at the top of the organizational pyramid.
b.The president is at the top of the organizational pyramid.
c.Front-line people are at the top of the organizational pyrami
d.
d.Customers are at the top of the organizational pyramid.
e.Middle management, because of their importance, is at the top of the
organizational pyramid.
Answer: d Page: 140 Level of difficulty: Medium
Part 3: Connecting with Customers
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.Report rating
d.Customer perceived value
https://www.360docs.net/doc/ef12277125.html,petitors market share rate
Answer: d Page: 141 Level of difficulty: Medium
5.Total customer value is the perceived monetary value of the bundle of economic,
functional, and ________ benefits customers expect from a given market offering.
a.psychological
b.intangible
c.realized
d.fabricated
e.advertised
Answer: a Page: 141 Level of difficulty: Hard
6.The bundle of costs customers expect to incur in evaluating, obtaining, using, and
disposing of the given market offering, including monetary, time, energy, and psychic costs is called the ________.
https://www.360docs.net/doc/ef12277125.html,anizational expense ratio
b.shopper’s fatigue
c.total customer cost
d.analysis paralysis
https://www.360docs.net/doc/ef12277125.html,parison shopping to comparison buying ratio
Answer: c Page: 141 Level of difficulty: Medium
7.In applying a customer’s perceived value to a decision, a seller who is at a customer
perceived value disadvantage has two alternatives: to increase total customer value or ________.
a.increase a cash-back bonus
b.decrease cost
c.lose the sale to the competitor
d.advertise more frequently
e.offer an extended warranty
Answer: b Page: 143 Level of difficulty: Medium
8.The ________ consists of the whole cluster of benefits the company 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
Answer: e Page: 143 Level of difficulty: Medium
Chapter 5: Creating Customer Value, Satisfaction, and Loyalty
9.Total customer satisfaction 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 experience
e.customer attitude and salesperson’s attitude
Answer: b Page: 144 Level of difficulty: Hard
10.Buyers form their expectations from all of the following EXCEPT ________.
a.past buying experience
b.friends and associates advice
c.marketers’ information
https://www.360docs.net/doc/ef12277125.html,petitors’ information
https://www.360docs.net/doc/ef12277125.html,ernmental newsletters
Answer: e Page: 144 Level of difficulty: Easy
11.JetBlue is able to meet or exceed customer expectations of low price air travel in part
to a few corporate commandments like: safety, caring, integrity, fun and passion.
JetBlue refers to these as ________.
a.teamwork parables
b.values
c.satisfaction indices
d.customer focus statements
e.JetBlue benefits
Answer: b Page: 144 Level of difficulty: Medium
12.A customer’s decision to be loyal or to defect is the sum of many small encounters
with the company. Consulting firm Forum Corporation says that in order for all these small encounters to add up to customer loyalty, companies need to create ________.
a. a reward program
b. a comprehensive customer database
c. a branded customer experience
d.strong word-of-mouth promotions
e. a top-notch advertising campaign
Answer: c Page: 144 Level of difficulty: Hard
13.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 satisfaction
e.to have customers on the board of directors
Answer: d Page: 145 Level of difficulty: Medium
Part 3: Connecting with Customers
14.The best survey method to measure customer satisfaction directly is ________.
a.to employ a mystery shopper
b.the mailed questionnaire
c.to survey former customers
d.periodic surveys
https://www.360docs.net/doc/ef12277125.html,pute the customer loss rate
Answer: d Page: 146 Level of difficulty: Medium
15.Which of the following firms leads its industry with a number one ranking for
customer satisfaction on the ACSI scale (American Consumer Satisfaction Index) with a score of 87?
a.Cadillac
b.Ford
c.Chrysler
d.Chevrolet
e.Corvette
Answer: a Page: 146 Level of difficulty: Medium
16.________ 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: 146 Level of difficulty: Easy
17.Total quality is the key to value creation and customer satisfaction. Marketing
managers have two roles to play in a quality-centered company. First, they must participate in formulating strategies and policies to help the company win through total quality excellence. Second, they must ________.
a.participate in cross-functional team building
b.deliver marketing quality alongside production quality
c.define customer requirements during the innovation stage of the product life cycle
d.set expectations both internally and externally
e.work closely with the sales team to create a dynamic sales message
Answer: b Page: 147 Level of difficulty: Hard
18.________ is an organization-wide approach to continuously improving the quality of
all the organization’s processes, products, and services.
a.Total quality management
b.Strategic management
c.Profit-centered management
d.Customer-retention management
e.Total customer control management
Answer: a Page: 147 Level of difficulty: Medium
Chapter 5: Creating Customer Value, Satisfaction, and Loyalty
19.The 20-80-30 rules reflects the idea that ________.
a.the top 20 percent of customers generate 80 percent of the company’s profits, half
of which are lost serving the bottom 30 percent of unprofitable customers
b.the top 20 percent of customers are highly satisfied, 80 percent of customers will
recommend the company to a friend, and 30 percent are unsatisfied
c.20 percent of customers are unprofitable, 80 percent of customers make up 30
percent of a company’s profits
d.20 percent of the company’s profits are generated by 80 percent of customers, and
30 percent of customers are satisfied
e.any new product offering will be accepted by 20 percent of the customers
immediately, this figure will eventually rise to 30 percent, however, 80 percent of the customers will be up for grabs throughout the product life cycle for the product
Answer: a Page: 148 Level of difficulty: Hard
20.Most companies have learned that the ________ are the most profitable because of
service expectations and their willingness to pay almost full price for the products they purchase.
https://www.360docs.net/doc/ef12277125.html,rge-size customers
b.midsize customers
c.small-size customers
d.niche customers
e.target market customers
Answer: b Page: 148 Level of difficulty: Medium
21.A ________ 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.
a.profitable
b.semi-profitable
c.unprofitable
d.niche
e.target
Answer: a Page: 149 Level of difficulty: Easy
22. 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 (RBC)
d.Activity-Based Costing (ABC)
e.Future Date Costing (FDC)
Answer: d Page: 149 Level of difficulty: Medium
Part 3: Connecting with Customers
23.Which of the following is the best example of what is called a leverageable advantage?
a.Dell avoiding selling its products in retail stores.
b.Apple winning design awards and producing unique commercials.
c.Microsoft’s use of its operating system to Microsoft Office as a means to supply
networking applications.
d.Southwest Airlines winning the J.D. Power award.
e.American tobacco companies attempts to diversify their holdings after the famous
tobacco case losses.
Answer: c Page: 150 Level of difficulty: Hard
24.Taco Bell has determined that keeping customers satisfied can be very profitable. A
repeat customer in Taco Bell’s eyes can be worth as much as ________ over the customer’s lifetime.
a.$100,000
b.$61,000
c.$35,000
d.$11,000
e.$2,000
Answer: d Page: 150 Level of difficulty: Hard
25.The aim of customer relationship management (CRM) is to produce high customer
________.
a.value
b.loyalty
c.profitability
d.satisfaction
e.equity
Answer: e Page: 151 Level of difficulty: Medium
26.The three drivers of customer equity are: value equity, brand equity, and ________
equity.
a.relationship
b.revenue
c.quality
d.price
e.product
Answer: a Page: 151 Level of difficulty: Easy
27.Sub-drivers of relationship equity include all of the following EXCEPT ________.
a.loyalty programs
b.special recognition and treatment programs
https://www.360docs.net/doc/ef12277125.html,munity building programs
d.knowledge-building programs
e.price protection programs
Answer: e Page: 151 Level of difficulty: Hard
Chapter 5: Creating Customer Value, Satisfaction, and Loyalty 28.An alternative formulation to customer equity is provided by Blattberg, Getz, and
Thomas. They view customer equity as being driven by three components: acquisition, ________, and add-on selling.
a.satisfaction
b.retention
c.perceived value
d.quality
e.pricing
Answer: b Page: 151 Level of difficulty: Medium
29.________ is seen as the cumulative value of the firm’s network of relationships with
its customers, partners, suppliers, employers, and investors.
a.Responsive equity
b.Market equity
c.Relational equity
d.Strategic equity
e.Satisfaction equity
Answer: c Page: 152 Level of difficulty: Medium
30.The ability of a company to meet each customer’s requirements—to prepare on a
mass basis individually designed products, services, programs, and communications, is referred to as ________.
a.proactive customer service
b.individualization
c.mass customization
https://www.360docs.net/doc/ef12277125.html,petitive advantage
e.target market customization
Answer: c Page: 152 Level of difficulty: Hard
31.A customer touch point in the airline industry would include an item 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 transportation
https://www.360docs.net/doc/ef12277125.html,petency of a travel agent
Answer: a Page: 152 Level of difficulty: Medium
32.All of the following would be among the Peppers and Rogers’s four-step framework
for one-to-one marketing that can be adapted to CRM marketing EXCEPT ________.
a.customizing products, services, and messages to each customer
b.interacting with individual customers to learn their needs
c.always offering the lowest price
d.differentiating customers in terms of their needs and value to the company
e.identify your prospects and customers
Answer: c Page: 154 Level of difficulty: Hard
Part 3: Connecting with Customers
33.Winning companies improve the value of their customer base by excelling at
strategies listed below EXCEPT ________.
a.eliminating low-profit customers immediately
b.reducing the rate of customer defection
c.increasing the longevity of the customer relationship
d.making low-profit customers more profitable or terminating them
e.focusing disproportionate efforts on high-value customers
Answer: a Page: 154 Level of difficulty: Medium
34.Which of the following is a characteristic of one-to-one marketing?
a.Mass promotion
b.Standard product
c.Two-way messages
d.Share of market
e.Customer attraction
Answer: c Page: 155 Level of difficulty: Medium
35.Another term for high customer ________ is customer churn.
a.retention
b.defection
c.value
d.perception
e.belief
Answer: b Page: 155 Level of difficulty: Easy
36.Markets can be characterized by their long-term buying dynamics and how easily and
often customers can enter and leave. In ________, customers can leave and come back.
a.permanent capture markets
b.simple retention markets
c.advocate markets
d.simple competitive markets
e.customer migration markets
Answer: e Page: 156 Level of difficulty: Medium
37.In ________ marketing, the salesperson contacts the customer from time to time with
suggestions about improved product uses or new products.
a.accountable marketing
b.proactive marketing
c.reactive marketing
d.partnership marketing
e.basic marketing
Answer: b Page: 157 Level of difficulty: Medium
Chapter 5: Creating Customer Value, Satisfaction, and Loyalty 38.Most company’s practice only ________ when their markets contain many customers
and their unit profit margin(s) are small.
a.reactive marketing
b.partnership marketing
c.basic marketing
d.proactive marketing
e.accountable marketing
Answer: c Page: 157 Level of difficulty: Easy
39.In markets with few customers and high profit margins, most sellers will move
toward ________ marketing.
a.reactive marketing
b.partnership marketing
c.basic marketing
d.proactive marketing
e.accountable marketing
Answer: b Page: 157 Level of difficulty: Medium
40.The CRM (customer relationship management) imperative is characterized by five
steps or factors. All of the following would be among those steps or factors 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: e Page: 158 Level of difficulty: Hard
41.When companies provide rewards to customers who buy frequently and in substantial
amounts, this is referred to as ________.
a.benefit programs
b.frequency programs
c.satisfaction programs
d.loyalty programs
e.quality programs
Answer: b Page: 159 Level of difficulty: Easy
42.Frequency marketing is an acknowledgment of the fact that 20 percent of a
company’s customers might account for ________ percent of its business.
a.50
b.70
c.40
d.80
e.90
Answer: d Page: 159 Level of difficulty: Medium
Part 3: Connecting with Customers
https://www.360docs.net/doc/ef12277125.html,panies who try to increase a customer’s likelihood to repurchase a product may
try to create long-term contracts, turn the product into a long-term service, and ________.
a.send frequent surveys
b.offer coupons
c.charge lower prices to customers who purchase large supplies
d.request the customer join their loyalty program
e.encourage customers to purchase in greater frequency
Answer: c Page: 162 Level of difficulty: Medium
44.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 is called ________.
a. a customer database
b. a customer mail list
c.target market segments
d.customer segments
e.relationship markets
Answer: a Page: 162 Level of difficulty: Medium
45.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: c Page: 162 Level of difficulty: Easy
46.A _____________ is simply a set of names, addresses, and telephone numbers.
a.customer database
b.customer mailing list
c.call-waiting list
d.psychographic list
e.demographic list
Answer: b Page: 163 Level of difficulty: Easy
47.A customer database should contain all of the following EXCEPT ________.
a. a customer’s past purchases
b.demographics
c.psychographics
d.mediagraphics
e.an assessment of competitive strengths and weaknesses
Answer: e Page: 163 Level of difficulty: Medium
Chapter 5: Creating Customer Value, Satisfaction, and Loyalty 48.A ________ would contain such items as past volumes, prices, profits, buyer team
names, 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.general corporate database
Answer: d Page: 163 Level of difficulty: Easy
49.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 rebate card
d.an ad run on a national television network
e. a customer-requested service call
Answer: d Page: 163 Level of difficulty: Medium
50.James Everett is a telemarketer. He can use his company’s ________ to respond to
customer inquiries more effectively because of his ability to see a total picture of the customer relationship.
a.data warehouse
b.call back list
c.call rejection list
d.corporate database
e.Better Business Bureau contacts
Answer: a Page: 164 Level of difficulty: Medium
51.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: c Page: 164 Level of difficulty: Medium
Part 3: Connecting with Customers
52.________ involves the use of sophisticated statistical and mathematical techniques
such as cluster analysis, automatic interaction detection, predictive modeling, and neural networking.
a.Data management
b.Data marketing
c.Target market analysis
d.Data accumulation
e.Datamining
Answer: e Page: 164 Level of difficulty: Medium
53.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 deepen customer loyalty
e.to avoid serious customer mistakes
Answer: a Pages: 164–165 Level of difficulty: Medium
54.Susan Lefferts’company advertises widely. In each magazine ad, a business reply
card is attached. Ms. Lefferts uses these cards to build her company’s database. In which of the following ways would Ms. Lefferts most likely be using the newly constructed database?
a.To deepen customer loyalty.
b.To reactivate customer purchases.
c.To avoid serious customer mistakes.
d.To determine if up-selling is appropriat
e.
e.To identify prospects.
Answer: e Page: 164 Level of difficulty: Hard
55.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: 165 Level of difficulty: Medium
Chapter 5: Creating Customer Value, Satisfaction, and Loyalty 56.Royal 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 quick commitments.
a.advertising
b.database
c.mail catalogs
d.public relations department
e.radio advertising
Answer: b Page: 164 Level of difficulty: Easy
57.Which of the following is considered to be one of the four problems that can deter a
firm from using CRM (customer relationship marketing)?
https://www.360docs.net/doc/ef12277125.html,petitors 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: 165 Level of difficulty: Medium
58.Building a database would not be worthwhile for a company in all of the following
cases EXCEPT ________.
a.where the product is a one-in-a-lifetime purchase
b.where customers show little loyalty to a brand
c.where 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: c Page: 165 Level of difficulty: Hard
59.A study estimated the average return on investment for a data warehouse over the
course of three years is more than ________.
a.400 percent
b.200 percent
c.100 percent
d.85 percent
e.75 percent
Answer: a Page: 166 Level of difficulty: Hard
60.All of the following are considered to be among the main perils of CRM EXCEPT
________.
a.implementing CRM before creating a customer strategy
b.the enormous cost that might eventually 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: b Page: 167 Level of difficulty: Medium
Part 3: Connecting with Customers
True/False
61. Managers who believe the customer is the company’s only true ―profit center‖
consider the traditional organization chart to be obsolete.
Answer: True Page: 140 Level of difficulty: Easy
62. The modern customer-oriented organization chart places top management at the top
of the pyramid as long as they can think like consumers.
Answer: False Page: 140 Level of difficulty: Medium
63. There are two determinates of customer delivered-value: total customer value and
total customer cost.
Answer: True Page: 141 Level of difficulty: Hard
64. 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
Answer: True Page: 141 Level of difficulty: Medium
65. Total customer value is the perceived monetary value of all the purchases a customer
makes on an annual basis.
Answer: False Page: 141 Level of difficulty: Medium
66. Professional buyers and purchasing agents operate under various constraints and
occasionally make choices that give more weight to their personal benefit than to the company’s benefit.
Answer: True Page: 142 Level of difficulty: Medium
67. The value proposition is stated in the price of a product and readily recognized by the
average consumer.
Answer: False Page: 143 Level of difficulty: Medium
68. The value-delivery system includes all the experiences the customer will have on the
way to obtaining and using the offering.
Answer: True Page: 143 Level of difficulty: Medium
69. For a consumer to be delighted with a product or service he or she must perceive that
performance exceeds expectations.
Answer: True Page: 144 Level of difficulty: Easy
70. The ultimate goal of the customer-centered firm is to create high customer
satisfaction.
Answer: False Page: 144 Level of difficulty: Hard
71. The key to customer retention is customer satisfaction.
Answer: True Page: 145 Level of difficulty: Easy
Chapter 5: Creating Customer Value, Satisfaction, and Loyalty 72. At the top of the package delivery industry with a satisfaction index score of 82 is
FedEx.
Answer: True Page: 146 Level of difficulty: Medium
73. 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: False Page: 146 Level of difficulty: Medium
74. Conformance quality and performance quality is essentially the same thing in a
marketing sense.
Answer: False Page: 147 Level of difficulty: Medium
75. Total quality management (TQM) is a production department approach to
continuously improving the quality of all the production processes.
Answer: False Page: 147 Level of difficulty: Medium
76. Marketers have found that the most essential role to be played in defining and
delivering high-quality goods and services to target customers is that of price (e.g., price it right and it will sell).
Answer: False Page: 148 Level of difficulty: Easy
77. 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: True Page: 148 Level of difficulty: Medium
78. 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: 149 Level of difficulty: Medium
79. Most companies measure customer satisfaction and individual customer profitability. Answer: False Page: 149 Level of difficulty: Medium
80. Unprofitable customers who defect to a competitor should be encouraged to do so. Answer: True Page: 149 Level of difficulty: Medium
81. Customer profitability analysis (CPA) is best conducted with the tools of an
accounting technique called Activity-Based Costing (ABC).
Answer: True Page: 149 Level of difficulty: Medium
82. According to customer profitability analysis (CPA), platinum customers spend the
most money with the organization thereby making them valuable.
Answer: False Page: 149 Level of difficulty: Hard
83. Any competitive advantage must be seen by customers as a customer advantage. Answer: True Page: 150 Level of difficulty: Medium
Part 3: Connecting with Customers
84. Customer lifetime value (CLV) describes the net present value of the stream of future
profits expected over the customer’s lifetime purchases.
Answer: True Page: 150 Level of difficulty: Medium
85. Carl Sewell, in Customers for Life,estimated that a customer entering his car
dealership for the first time represents a potential lifetime value of over $300,000. Answer: True Page: 150 Level of difficulty: Medium
86. The aim of customer relationship management is to keep the costs of meeting and
tracking consumers as low as possible.
Answer: False Page: 151 Level of difficulty: Medium
87. Brand equity is the customer’s objective assessment of the utility of an offering based
on perceptions of its benefits relative to its costs.
Answer: False Page: 151 Level of difficulty: Hard
88. Customer equity is driven by three components: acquisition, retention, and add on
selling.
Answer: False Page: 151 Level of difficulty: Medium
89. 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: True Page: 152 Level of difficulty: Easy
90. A customer touch point is the time when the customer makes a purchase. Answer: False Page: 152 Level of difficulty: Medium
91. A key driver of shareholder value is the aggregate value of the customer base. Answer: True Page: 154 Level of difficulty: Medium
92. One of the characteristics of mass marketing is using a one-way message in
promotions.
Answer: True Page: 155 Level of difficulty: Easy
93. Customer churn is how rapidly a store can move customers through its checkout
facility or process.
Answer: False Page: 155 Level of difficulty: Medium
94. Ninety-six percent of dissatisfied customers don’t complain; they just stop buying. Answer: True Page: 155 Level of difficulty: Medium
95. The average company loses 25 percent of its customers each year.
Answer: False Page: 156 Level of difficulty: Hard
Chapter 5: Creating Customer Value, Satisfaction, and Loyalty 96. A good description of a permanent capture market would be ―once a customer,
always a customer.‖
Answer: True Page: 156 Level of difficulty: Medium
97. In proactive marketing the salesperson simply sells the product.
Answer: False Page: 157 Level of difficulty: Medium
98. A customer database is simply a listing of a customer’s name, address, and phone number for credit reference.
Answer: False Page: 162 Level of difficulty: Easy
99. Cluster analysis is a good example of a statistical technique that might be employed
in datamining.
Answer: True Page: 164 Level of difficulty: Medium
100. Database marketing is most frequently used by business marketers and service providers (hotels, banks, airlines, and insurance, credit card, and telephone companies) that normally and easily collect a lot of customer data.
Answer: True Page: 166 Level of difficulty: Medium
Essay
101. Compare and contrast the traditional organizational 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 inverted (see the traditional model [e.g., top management—middle management—front-line people—customers]). Customers are at the top followed by front-line people, then middle management, and, lastly, top management. Students might also provide some discussion on why the inversion is beneficial.
Page: 140 Level of difficulty: Medium
102. 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 definition.
Page: 146 Level of difficulty: Easy
Part 3: Connecting with Customers
103. Describe the concept of competitive advantage. Discuss the differences between competitive advantage and leverageable advantage.
Suggested Answer: Competitive advantage is a company’s ability to perform in one or more ways that competitors cannot or will not match. Michael Porter urged companies to build a sustainable competitive advantage. But few competitive advantages are sustainable. At best, they may be leverageable. A leverageable advantage is one that a company can use as a springboard to new advantages. See the Microsoft example in the text for additional information and discussion.
Page: 150 Level of difficulty: Medium
104.Discuss the differences among customer equity, value equity, brand equity, and relationship equity.
Suggested Answer: Customer equity is the total of the discounted lifetime values of all of the firm’s customers. Value equity is the customer’s objective assessment of the utility of an offering based on perceptions of its benefits relative to its costs.
Brand equity is the customer’s subjective and intangible assessment of the brand, above and beyond its objectively perceived value. Relationship equity is the customer’s tendency to stick with the brand.
Page: 151 Level of difficulty: Hard
105.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.
Pages: 153–154 Level of difficulty: Hard
106.Characterize the five levels of investment in customer relationship building that a company can follow.
Suggested Answer: The five levels are: (1) basic marketing—the salesperson simply sells the product, (2) reactive marketing—the salesperson sells the product and encourages the customer to call if he or she has questions, comments, or complaints, (3) accountable marketing—the salesperson phones the customer to check whether the product is meeting expectations and asks for suggestions for improvement or dissatisfactions, (4) proactive marketing—the salesperson contacts the customer from time to time with suggestions about improved product uses or new products, and (5) partnership marketing—the company works continuously with its large customers to help improve their performance.
Page: 157 Level of difficulty: Hard
Chapter 5: Creating Customer Value, Satisfaction, and Loyalty 107.Today, companies are increasingly concerned about customer defection. There are five main steps a company can take to reduce the defection rate. Characterize those five steps.
Suggested Answer: The five 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, (3) the company needs to estimate how much profit it loses when it loses customers, (4) the company needs to figure out how much it would cost to reduce the defection rate, and (5) nothing beats listening to customers.
Pages: 158–159 Level of difficulty: Hard
108.Discuss the concepts of a data warehouse and datamining.
Suggested Answer: Data are collected by the company’s contact center and organized into a data warehouse. Company personnel can capture, query, and analyze the data. Inferences can be drawn about an individual customer’s 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: 164Level of difficulty: Medium
109.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 able 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: 164–165 Level of difficulty: Medium
110.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.
Page: 165 Level of difficulty: Medium
Part 3: Connecting with Customers
APPLICATION QUESTIONS
Multiple Choice
111.John Chambers, CEO of Cisco Systems, said ―Make your customer the center of your culture.‖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.cultural engineering
d.innovation engineering
e.management engineering
Answer: b Page: 139 Level of difficulty: Medium
112.Next to the customers in a modern customer-oriented organization chart, we would expect to find the ________ of an organization.
a.top management
b.marketing department
c.middle management
d.front-line people
e.service department
Answer: d Page: 140 Level of difficulty: Easy
113.eBay sees listening, adapting, and enabling as its main roles. This is clear in one of the company’s most cherished institutions: ________.
a.the Midnight Madness Bid
b.ecological concern
c.truth in advertising
d.the Voice of the Customer program
e.the Immediate Buyback Program
Answer: d Page: 141 Level of difficulty: Medium
114.If you were to write a good working definition of the term total customer value, you should write ________.
a.the sum of value times (X) expectation
b.the sum of customer perceived value and actualized value
c.the perceived monetary value of the bundle of economic, functional, and
psychological benefits customers expect from a given market offering
d.the difference between the prospective customer’s evaluation of all the
benefits and all the costs of an offering and the perceived alternatives
e.the concept is simply a bundle of costs and expectations
Answer: c Page: 141 Level of difficulty: Hard