Chapter 5 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 Rationale: In a modern customer-oriented organizational structure, placing customers at the top signifies the prioritization of customer needs and satisfaction. This approach emphasizes customer-centricity and aligns organizational goals with fulfilling customer requirements. 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 Answer: D Rationale: Placing customers at the top of the organizational pyramid reflects the customer-centric approach of modern organizations, emphasizing the importance of meeting customer needs and preferences to drive business success. 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 Rationale: Frontline employees are positioned immediately after the customer segment in a customer-oriented organization chart because they are directly involved in interacting with and serving customers, thereby playing a crucial role in delivering value and satisfaction. 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 Rationale: Customer-perceived value represents the net assessment made by a prospective customer comparing the benefits and costs of a product or service against perceived alternatives. It indicates the perceived value gained from choosing a particular offering over other available options. 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 Rationale: Customers tend to choose the product or service that offers the highest perceived value, as this reflects their assessment of the benefits received relative to the costs incurred. 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 Rationale: Total customer benefit represents the perceived value derived by customers from a market offering, encompassing economic, functional, and psychological benefits expected from the product or service. 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 Rationale: Total customer cost refers to the various expenses and efforts customers anticipate in the process of evaluating, acquiring, utilizing, and disposing of a product or service, thereby influencing their decision-making and perceived value. 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 Rationale: Customer-perceived value represents the net assessment made by customers comparing the perceived benefits against the perceived costs of a product or service in relation to alternative offerings available in the market. 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 Rationale: Identifying the major attributes and benefits that customers value is the initial step in customer value analysis, helping organizations understand customer preferences and prioritize efforts to deliver value accordingly. 10. 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 Rationale: Monitoring customer values over time enables organizations to track changes in customer preferences and perceptions, facilitating ongoing adjustments to product offerings and strategies to maintain or enhance customer satisfaction and loyalty. 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 Rationale: Offering a warranty helps reduce the perceived risk for customers, as they feel more secure about their purchase knowing that they are protected against potential issues, thus lowering the total customer cost. 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 Rationale: Loyalty refers to the tendency of customers to consistently choose a particular product or service over others, even when faced with alternatives or marketing efforts aimed at influencing their behavior. 13. 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, 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 Rationale: The value proposition of the Surami bike describes the unique benefits and features offered by TBS Bikes to its customers, emphasizing speed along with additional attributes to create value and differentiation in the market. 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 Rationale: The value delivery system encompasses all the processes and activities involved in delivering the product or service to the customer, including pre-purchase experiences, purchase process, and post-purchase usage, ensuring a seamless and satisfactory customer journey. 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 Rationale: By emphasizing the experiences customers will have in obtaining and consuming their food orders, Sammy's is focusing on its value delivery system, ensuring that customers receive value not only from the products but also from the entire process of obtaining and consuming them. 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 Rationale: Total customer satisfaction is assessed by comparing the perceived performance of a product or service with the customer's expectations, where satisfaction increases when perceived performance exceeds expectations and decreases when it falls short. 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 Rationale: Greater customer satisfaction has been associated with higher returns and lower risk in the stock market, indicating its significance for financial performance and market success. 18. ________ 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 Rationale: Periodic surveys are effective tools for directly measuring customer satisfaction, assessing repurchase intention, and determining the likelihood of customers recommending the company and its brand to others, providing valuable insights for improving customer relationships. 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 Rationale: Mystery shoppers can be employed by Field Grocery to anonymously evaluate the strengths and weaknesses in customer service across its stores, providing unbiased feedback on various aspects of the customer experience. 20. 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 Rationale: Customers who register a complaint may still choose to do business with the company again if their complaint is resolved satisfactorily, indicating the importance of effective complaint resolution in retaining customers and maintaining loyalty. 21. Which of the following is the best method of recovering customer goodwill? 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 Rationale: Contacting the complaining customer as quickly as possible demonstrates responsiveness and concern for their satisfaction, which can help in recovering customer goodwill and restoring trust in the company. 22. ________ 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 Rationale: Quality refers to the overall features and characteristics of a product or service that determine its ability to meet the needs and expectations of customers, whether explicitly stated or implied. 23. When two brands of the same basic product deliver their respective promised quality, they are delivering ________. A) performance quality B) conformance quality C) unique quality D) accuracy quality E) customer support Answer: B Rationale: Conformance quality refers to the ability of a product or service to meet specified standards and expectations, ensuring consistency and reliability in delivering the promised quality. 24. 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 Rationale: When both Rade and Talion deliver their promised qualities, they are ensuring conformance quality by meeting the specified standards and expectations set forth in their promises. 25. The 80-20 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 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 Rationale: The 80-20 rule, also known as the Pareto Principle, suggests that approximately 80% of the outcomes result from 20% of the causes. In business, it often implies that roughly 80% of profits come from the top 20% of customers. 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 Rationale: A profitable customer generates a revenue stream that exceeds the costs incurred by the company in attracting, selling to, and servicing that customer. 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 D) market nicher E) pioneer customer Answer: B Rationale: A profitable customer is one whose lifetime value exceeds the cost of acquiring, serving, and retaining that customer, contributing positively to the company's bottom line. 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 Rationale: Customer profitability analysis (CPA) utilizes activity-based costing (ABC) as its primary tool to accurately allocate costs to individual customers based on the specific activities and resources consumed in serving them. 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. 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 Rationale: Activity-based costing (ABC) can be used to conduct customer profitability analysis by assigning costs to individual customers based on the specific activities and resources consumed in serving them, providing insights into the profitability of different customer segments. 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 Rationale: Customer lifetime value (CLV) represents the present value of the stream of future profits expected from a customer's purchases over their entire relationship with the company, providing a comprehensive measure of their long-term value to the organization. 31. The aim of customer relationship management is to produce high customer ________. A) integrity B) loyalty C) innovation D) liability E) equity Answer: B Rationale: Customer relationship management (CRM) focuses on building and maintaining strong relationships with customers to foster loyalty, which in turn leads to repeat business and positive word-of-mouth referrals. 32. ________ 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 Rationale: Customer relationship management (CRM) involves managing customer information and interactions across various touch points to enhance customer loyalty and satisfaction. 33. 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 Answer: A Rationale: Customer touch points are critical moments of interaction between a customer and a brand, encompassing all experiences and communications that influence the customer's perception and relationship with the brand. 34. 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 Rationale: The reservations desk represents a customer touch point for Abacus Airlines where customers directly interact with the brand during the booking process, influencing their overall experience and perception. 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 E) a customer touch point Answer: E Rationale: The hotel's actions at various stages of Rachel and Josh's experience, such as offering chilled juice upon arrival, handling check-in formalities, and providing amenities in the room, represent different customer touch points that influence their perception and satisfaction. 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 Rationale: Customer relationship management (CRM) relies on detailed individual account information to provide personalized and timely customer service, enhancing the overall customer experience and satisfaction. 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 Answer: B Rationale: Permission marketing is rooted in the idea of obtaining consent from consumers to receive marketing messages, departing from traditional interruption marketing methods, and focusing on building relationships with interested customers. 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 Rationale: Permission marketing involves sending messages or communications to consumers only when they have explicitly expressed an interest or consent to engage with the brand, ensuring that marketing efforts are targeted and well-received. 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 Rationale: Customizing products, services, and messages to each customer is a fundamental aspect of one-to-one marketing that can be adapted for customer relationship management (CRM) strategies to enhance personalization and customer satisfaction. 40. Another term for high customer ________ is customer churn. A) retention B) defection C) value D) perception E) belief Answer: B Rationale: Customer churn refers to the rate at which customers defect or leave a company, indicating a loss of loyalty and highlighting the importance of retaining customers to maintain business profitability. 41. 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 Rationale: Distinguishing the causes of customer attrition allows the company to understand why customers are leaving and identify areas for improvement, ultimately reducing defection rates. 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 Rationale: Jack is in the nonrejecter stage, where he has tried shopping at VeggiesNmore and had a positive experience, but he remains open to trying out other options before becoming a regular user. 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 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 Rationale: Amy is in the aware stage because she has become aware of VeggiesNmore through information provided by her colleague, indicating her initial exposure to the brand. 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 Rationale: Satisfied customers contribute to the company's customer relationship capital, which encompasses the value derived from positive relationships with customers. 45. 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 Answer: C Rationale: Offering additional products like branded clothing, CDs, and books alongside toys is an example of cross-selling, aimed at increasing the value of each customer by expanding their purchase potential. 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 Rationale: LifeTime Insurance's strategy of encouraging unprofitable customers to switch to competitors demonstrates an approach of terminating relationships with low-profit customers to focus on more profitable segments. 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 Rationale: Charging fees for once-free services helps banks make low-profit customers more profitable by increasing their revenue contribution, ensuring a minimum level of profitability from each customer. 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 Rationale: Organizing cycling events and parties for regular customers demonstrates a focus on building relationships and providing exclusive benefits to high-profit customers. 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. 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 Rationale: Stocking biking gear alongside bicycles provides opportunities for cross-selling additional products to customers, enhancing the growth potential of each customer. 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 Rationale: Charging for deliveries made outside the city helps make low-profit customers more profitable by offsetting the costs associated with servicing those customers. 51. Companies provide rewards to customers who buy often and in substantial amounts. These reward schemes are referred to as ________. A) benefit programs B) frequency programs C) satisfaction programs D) profitability programs E) quality programs Answer: B Rationale: Frequency programs are designed to incentivize customers to make repeated purchases by offering rewards or benefits based on the frequency or volume of their purchases. 52. 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 Rationale: The first company to introduce a frequency program typically gains the most benefit as it can establish itself as a pioneer in loyalty programs within the industry, potentially gaining a competitive advantage and capturing market share. 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 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 long-term loyalty builders E) are useless unless there are fees and membership conditions Answer: D Rationale: Open membership club programs may attract a broader range of customers, but they may not be as effective in building long-term loyalty compared to limited-membership clubs, as they may include customers with fleeting interest who do not contribute significantly to loyalty or repeat purchases. 54. 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 Rationale: Southwest Airlines' Rapid Rewards program functions as a club membership program, where customers earn rewards based on their flight activity, encouraging loyalty and repeat business. 55. Some customers inevitably become inactive or drop out. The challenge for marketers is to reactivate them through ________ strategies. A) win-back B) retention C) defection D) sell-out E) recuperation Answer: A Rationale: Win-back strategies are aimed at reactivating inactive or lost customers by enticing them to return through targeted marketing efforts and incentives. 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 Rationale: A customer database is a structured repository of detailed information about individual customers or prospects, used for various marketing activities such as lead generation, sales, and customer relationship management. 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 B) data mining C) database marketing D) participatory marketing E) permission marketing Answer: C Rationale: Database marketing involves the strategic use of customer databases and other data resources to facilitate targeted marketing activities, enhance customer relationships, and drive business growth. 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 Rationale: A customer mailing list typically consists of basic contact information such as names, addresses, and telephone numbers, used for communication purposes such as direct mail or telemarketing. 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 Rationale: A data warehouse integrates and stores comprehensive data from various sources, providing a unified view of customer information that enables telemarketers to respond to inquiries more effectively and tailor interactions based on the customer's history and preferences. 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 Rationale: Data mining involves the process of analyzing large datasets to uncover patterns, trends, and insights that can be used to inform marketing strategies, target specific customer segments, and optimize business performance. 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 Rationale: Sally is using data mining, specifically cluster analysis, to analyze the customer survey data and identify patterns or trends within it, aiding the company in understanding customer preferences and attitudes. 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 Rationale: By using business reply cards, Susan Lefferts is likely capturing contact information from respondents, allowing her to build a database of potential customers. She would primarily use this database to identify prospects for future marketing efforts. 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 Rationale: Phil Langston is likely using his database to deepen customer loyalty by identifying key customers who warrant special recognition and appreciation through the executive gifts, thereby strengthening their relationship with the company. 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 Rationale: Fingerhut's success as a direct-mail marketer can be attributed to its skillful use of database marketing, leveraging customer data to personalize marketing communications and target specific customer segments effectively. 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 Rationale: Customer relationship marketing, including the building and maintenance of customer databases, typically requires a significant investment in terms of resources, technology, and personnel to be effective in fostering long-term relationships with customers. 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 Rationale: Uncle Jim's selling snacks in stores throughout the country does not inherently involve collecting and leveraging customer data, which is essential for effective database marketing. 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 Rationale: Building a database is worthwhile for 2Wheels because it can help in identifying and segmenting repeat customers for targeted marketing efforts and fostering long-term relationships. 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 Rationale: Building a database is worthwhile for a company with a long relationship with its customers because it allows for personalized communication, targeted marketing, and the fostering of loyalty over time. 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 Rationale: An airline is most likely to use database marketing extensively, given the large volume of customer data generated from ticket purchases, frequent flyer programs, and other interactions, which can be leveraged for personalized marketing and customer relationship management. 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 Rationale: Choosing to consistently purchase products from 2Wheels demonstrates behavioral loyalty, indicating a pattern of repeat purchases and a preference for the brand's offerings. 71. Managers who believe the customer is the company's only true "profit center" consider the traditional organization chart to be obsolete. Answer: True Rationale: In a customer-centric approach, the organization's structure revolves around serving the customer's needs rather than adhering strictly to hierarchical structures. This implies that traditional organization charts, which may prioritize internal functions over customer needs, are seen as outdated in such managerial philosophies. 72. The modern customer-oriented organization chart places top management at the top of the pyramid. Answer: False Rationale: In a customer-oriented organization, the structure typically places the customer at the top of the pyramid, with all functions and roles within the company aimed at serving and satisfying customer needs. Top management may still hold significance, but they are part of a broader ecosystem focused on customer satisfaction. 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 Rationale: Customer-perceived value is indeed determined by the benefits a customer receives compared to the costs incurred, whether monetary or non-monetary. This is a fundamental concept in marketing, emphasizing the importance of delivering value to customers relative to their needs and preferences. 74. Total customer cost consists of only the non-monetary costs in evaluating, obtaining, using, and disposing of the given market offering. Answer: False Rationale: Total customer cost encompasses both monetary and non-monetary costs associated with evaluating, obtaining, using, and disposing of a product or service. Non-monetary costs are certainly a part of it, but monetary costs, such as the actual purchase price, also contribute to the total customer cost. 75. Customer-perceived value is the perceived monetary value of all the purchases a customer makes on an annual basis. Answer: False Rationale: Customer-perceived value refers specifically to the perceived worth of a particular product or service in relation to its benefits and costs. It's not a cumulative measure of all purchases made by a customer over a period but rather an evaluation made at the individual product or service level. 76. A seller who is at a disadvantage has two alternatives: decrease total customer benefit or increase total customer cost. Answer: False Rationale: When a seller is at a disadvantage, the preferable strategy is to enhance the total customer benefit or reduce the total customer cost. Decreasing customer benefit or increasing customer cost would likely further disadvantage the seller in the competitive market. 77. The value proposition is stated in the price of a product and readily recognized by the average consumer. Answer: False Rationale: The value proposition encompasses the entire offer made to the customer, including benefits and features, and is not solely reflected in the price. It's about communicating the unique value a product or service provides to the customer, which may go beyond just the price point. 78. The value delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. Answer: True Rationale: The value delivery system encompasses the entire process from pre-purchase to post-purchase experiences, including interactions with the company, product or service delivery, and customer support. It's essential for ensuring a seamless and satisfactory customer journey. 79. The value proposition is also known as the core positioning of the offering. Answer: False Rationale: While related, the value proposition and core positioning are not synonymous. The value proposition communicates the unique value a product or service provides to the customer, while core positioning refers to how a product or service is positioned in the market relative to competitors. 80. Loyalty is a person's feelings of pleasure or disappointment that result from comparing a product's perceived performance to expectations. Answer: False Rationale: Loyalty typically refers to a customer's commitment to a brand or product over time, often influenced by positive experiences, satisfaction, and trust. It's not solely based on comparing product performance to expectations but rather involves a broader emotional and psychological connection between the customer and the brand. 81. Customer satisfaction is the only way by which a firm can increase its profitability. Answer: False Rationale: While customer satisfaction is crucial for maintaining and growing a customer base, profitability can be influenced by various factors beyond satisfaction alone, such as cost management, pricing strategies, innovation, and market conditions. 82. Consumers' expectations result exclusively from past buying experiences. Answer: False Rationale: While past buying experiences can certainly shape consumer expectations, they can also be influenced by marketing efforts, word of mouth, societal norms, and other external factors that may not necessarily stem from personal experiences with a product or service. 83. The best thing a company can do in the face of company mistakes is to discourage the customer from complaining. Answer: False Rationale: Encouraging customer feedback and complaints can provide valuable insights into areas needing improvement and offer opportunities to rectify mistakes, leading to enhanced customer satisfaction and loyalty. 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 Rationale: This definition of quality emphasizes the comprehensive nature of product or service attributes that contribute to fulfilling customer needs, whether explicitly expressed or implied. 85. Conformance quality and performance quality are identical in the marketing sense. Answer: False Rationale: Conformance quality refers to the degree to which a product or service meets specified standards or requirements, while performance quality relates to how well the product or service actually performs its intended function. While related, they are distinct concepts in evaluating quality. 86. Two products with very different performance qualities can have the same conformance quality if both products deliver their respective promised quality. Answer: True Rationale: Conformance quality is concerned with meeting specified standards or requirements, so if two products meet their respective standards, they would be considered to have the same conformance quality regardless of their differing performance qualities. 87. 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 Rationale: Profitable customers generate revenues that exceed the costs associated with acquiring, serving, and retaining them. This definition aligns with the concept of customer lifetime value, where the focus is on maximizing the long-term profitability of customer relationships. 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 Rationale: Assessing customer profitability involves considering the cumulative impact of revenue and costs over the entire duration of the customer relationship, rather than focusing solely on individual transactions. This approach provides a more comprehensive view of the customer's value to the company. 89. Unprofitable customers who defect to a competitor should be encouraged to do so. Answer: True Rationale: Unprofitable customers drain resources without providing sufficient returns, so encouraging them to switch to competitors can free up resources to focus on more profitable segments and improve overall profitability. 90. Customer profitability analysis is best conducted with the tools of an accounting technique called activity-based costing. Answer: True Rationale: Activity-based costing (ABC) provides a detailed method for allocating costs to specific activities and processes, making it well-suited for analyzing the profitability of individual customers or customer segments by tracing costs associated with serving them. 91. Activity-based costing tries to identify the real costs associated with serving each customer. Answer: True Rationale: Activity-based costing (ABC) allocates costs based on activities performed, providing a more accurate representation of the resources consumed by serving each customer. It helps identify and allocate both direct and indirect costs associated with serving customers, thereby aiding in better decision-making. 92. Activity-based costing does not consider indirect, variable, and overhead costs. Answer: False Rationale: Activity-based costing considers all types of costs, including indirect, variable, and overhead costs. It aims to allocate these costs to specific activities or processes based on their consumption, providing a more accurate understanding of the cost drivers within an organization. 93. Customer lifetime value describes the net present value of the stream of future profits expected over the customer's lifetime purchases. Answer: True Rationale: Customer lifetime value (CLV) quantifies the value a customer brings to a business over their entire relationship with the company, considering not only current but also future purchases. It represents the net present value of the anticipated revenue generated from the customer's transactions over time. 94. The aim of customer relationship management is to keep the costs of meeting and tracking consumers as low as possible. Answer: False Rationale: While cost efficiency is a consideration in customer relationship management (CRM), its primary aim is to build and maintain long-term, mutually beneficial relationships with customers by delivering value and meeting their needs effectively. Cost reduction is not the sole objective; rather, it's about optimizing the value generated from customer interactions. 95. A customer touchpoint is the time when the customer makes a purchase. Answer: False Rationale: A customer touchpoint refers to any interaction between a customer and a company, whether it's through marketing communications, customer service interactions, product usage, or purchase experiences. It encompasses all points of contact throughout the customer journey, not just at the moment of purchase. 96. Permission marketing presumes that consumers know what they want. Answer: True Rationale: Permission marketing is based on the idea of obtaining consent from consumers before delivering marketing messages or engaging in promotional activities. It assumes that consumers are more receptive to marketing communications when they have actively given permission, indicating their interest or willingness to engage with the brand. 97. All companies should practice one-to-one marketing. Answer: False Rationale: One-to-one marketing, which involves customizing products, services, and marketing efforts for individual customers, may not be feasible or appropriate for all companies due to factors such as scale, resource constraints, and target market characteristics. Some businesses may benefit more from segment-based or mass marketing approaches. 98. Customer churn is how rapidly a store can move customers through its checkout facility or process. Answer: False Rationale: Customer churn refers to the rate at which customers stop doing business with a company or discontinue their subscriptions or memberships. It's a measure of customer attrition rather than the operational efficiency of a store's checkout process. 99. For a magazine, subscription renewal rate is a good measure of retention. Answer: True Rationale: Subscription renewal rate indicates the percentage of subscribers who choose to renew their subscriptions after the initial term expires. It serves as a measure of customer retention for subscription-based businesses like magazines, reflecting the ability of the publication to maintain ongoing relationships with its audience. 100. 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 Rationale: Customer retention efforts should be balanced against the costs associated with retaining customers. If the cost to discourage defection (e.g., through loyalty programs, incentives) is lower than the potential lost profit from losing the customer, it makes financial sense for the company to invest in retention strategies. However, this cost-benefit analysis should be carefully considered to ensure profitability. 101. 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. Answer: False Rationale: Profit rate often increases over the life of a retained customer due to factors such as increased purchases, referrals leading to new customers, potential for price premiums, and the spreading of fixed costs over a larger customer base. While there may be some increase in operating costs to service, the overall effect tends to be positive. 102. The marketing funnel identifies the profitability of consumers at each stage in the decision process. Answer: False Rationale: The marketing funnel represents the stages a consumer goes through from awareness to purchase. It does not inherently identify profitability at each stage but rather focuses on the progression of customer engagement and conversion. 103. Focusing disproportionate effort on high-profit customers will lead to lower customer profitability for those customers. Answer: False Rationale: Focusing effort on high-profit customers often leads to increased customer profitability, as these customers are likely to generate higher revenues and contribute more to the company's bottom line. However, it's essential to maintain a balanced approach to customer management to ensure all customer segments receive appropriate attention. 104. Frequency programs are designed to reward customers who buy frequently and in substantial amounts. Answer: True Rationale: Frequency programs, such as loyalty programs or reward schemes, aim to incentivize customers to make repeated purchases by offering rewards, discounts, or other benefits based on their purchase frequency and volume. 105. Clubs that are open to everyone who purchases a product or service are good for building a customer database. Answer: True Rationale: Opening clubs or membership programs to all customers who make purchases can help build a customer database by encouraging customers to provide their contact information in exchange for membership benefits. This allows companies to gather valuable data for marketing and relationship-building purposes. 106. It's often easier to re-attract ex-customers than to find new ones because the company knows their names and histories. Answer: True Rationale: Re-attracting ex-customers can be easier than acquiring new ones because the company already has some knowledge of their preferences, purchase history, and contact information. Leveraging this information can enable targeted re-engagement efforts to win back lapsed customers. 107. A customer database is simply a listing of a customer's name, address, and phone number for credit reference. Answer: False Rationale: A customer database typically includes more than just basic contact information. It often contains detailed customer profiles, purchase history, preferences, interactions, and other relevant data used for marketing, customer service, and relationship management purposes. 108. Cluster analysis is a statistical technique that can be employed in data mining. Answer: True Rationale: Cluster analysis is indeed a statistical technique used in data mining to group similar data points or objects into clusters. It helps identify patterns, relationships, and structures within datasets, which can be valuable for segmentation, targeting, and other marketing activities. 109. Building a customer database is not recommended when the product is a once-in-a-lifetime purchase. Answer: True Rationale: Building a customer database may not be as beneficial for products that are once-in-a-lifetime purchases since there may be limited opportunities for repeat business or ongoing customer relationships. In such cases, other marketing strategies may be more appropriate. 110. Loyal customers are the best ambassadors for a brand. Answer: False Rationale: Loyal customers can certainly be valuable brand ambassadors, but they are not necessarily the only ones. Any satisfied customer, regardless of their level of loyalty, has the potential to become a brand advocate and promote the company positively to others. 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. 112. Explain customer-perceived value. 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. 113. 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. 114. Explain total customer satisfaction. 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. 115. 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. 116. Identify ways in which companies facing customer complaints can recover customer goodwill. 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. 117. 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. 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. 119. 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. 120. 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: 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 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. 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 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. 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: 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. 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. 125. Create a value proposition for cell phone manufacturer LZT. Answer: LZT's value proposition could include good quality, reliable battery life, excellent design and style. 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. 127. Give an example of two products that have different performance quality but are of equal conformance quality. Answer: 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 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. 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: 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. 129. Give an example of how a hotel can generate customer loyalty at a "customer touch point". Answer: 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. 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: 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. 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: 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. 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. 133. 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. 134. 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: 2Wheels can institute membership fees and membership conditions to ensure that only members with a lasting interest join the club. 135. The management of Keiko has learned that the company risks losing a long-time customer, LZT, to a competitor. How can Keiko make it more difficult for LZT to switch to another customer? Answer: 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. 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. 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. 138. Uncle Jim's is a brand of ready-to-eat snacks that is widely distributed in supermarkets and stores across the country. The marketing team has recently suggested that the company adopt database marketing so that it can better target its customers. Should Uncle Jim's create a database? Give reasons for your answer. Answer: Uncle Jim's may not profit from creating a database because the unit sale of the products it sells is very small; the cost of gathering information will be high because the product is widely distributed; and there is no direct contact between the seller and ultimate buyer. 139. Sara is the marketing manager of a small HR consultancy firm. She is in the process of building a database to assist her company in its marketing efforts. Give five problems that can make the database less effective. Answer: 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. 140. Using an example, contrast behavioral loyalty and attitudinal loyalty to a product. Answer: James shows high behavioral loyalty to 2Wheels because he buys a lot of 2Wheels products. Sara shows high attitudinal loyalty to 2Wheels because she is very committed to the 2Wheels brand. Test Bank for Marketing Management Philip T Kotler, Kevin Lane Keller 9780132102926, 9780273753360, 9781292092621, 9780133856460, 9789332587403, 9780136009986
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