Top 10 Learning Questions for Chapter 5 - Martha Ballesteros

TOP 10 Learning Questions for

Chapter 5Creating Customer Value, Satisfaction, and Loyalty

Martha BallesterosDecember 2010

http://martha-ballesteros.blogspot.com/


1. Which of the following is not a profit tier?

A. Gold CustomersB. Silver CustomersC. Iron CustomersD. Lead Customers

2http://martha-ballesteros.blogspot.com/


Customer - Product Profitability Analysis

C1 C2 C3

P1 + + + Highly profitable product

P2 + Profitable product

P3 - - Losing Product

P4 - Mixed-bag product

High-profit customer

Mixed-bag customer

Losing customer

3

Customers

Products



Profit tiers classify customers into those worth pursuing and those that should receive less attention


Platinum customers – most profitable

Gold customers – profitable

Iron customers – low profitability but desirable for volume

Lead customers – unprofitable and undesirable


1. Which of the following is not a profit tier?

A. Gold CustomersB. Silver CustomersC. Iron CustomersD. Lead Customers



2. _______ is the difference between the prospective customer’s evaluation of all benefits and all costs of an offering and the perceived alternatives

A. Customer-Perceived ValueB. Value PropositionC. Value Delivery SystemD. Customer Lifetime Value



Determinants of Customer – Perceived Value


Total Customer Cost

ProductBenefit

Total Customer Benefit

Customer-PerceivedValue

ServicesBenefit

PersonnelBenefit

ImageBenefit

MonetaryCost

Time Cost

Energy Cost

PsychologicalCost


Customer – Perceived Value

Total Customer Benefit – perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering

Total Customer Cost – perceived bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of the given market offering

8

Total Customer Benefit – Total Customer Cost = Customer-Perceived Value



2. _______ is the difference between the prospective customer’s evaluation of all benefits and all costs of an offering and the perceived alternatives

A. Customer-Perceived ValueB. Value PropositionC. Value Delivery SystemD. Customer Lifetime Value



3. Which of the following statements about customer satisfaction is not true?

A. One key to customer retention is customer satisfaction

B. Customer satisfaction and customer loyalty are proportional

C. Greater customer satisfaction is linked to lower risk in the stock market

D. Generally, a highly satisfied customer is less sensitive to price



Customer Satisfaction

In general, satisfaction is a person’s feelings of

pleasure or disappointment that result from

comparing a product’s perceived performance

or outcome to their expectations



Monitoring Satisfaction

One key to customer retention is customer satisfaction

Customer satisfaction and customer loyalty are not proportional

Higher returns and lower risk in the stock market In general, a highly satisfied customer:

Stays loyal longer Buys more as the company introduces new products and

upgrades existing products Talks favorably to others about the company Pays less attention to the competition Less sensitive to price Less costly to serve because of routine transactions



3. Which of the following statements about customer satisfaction is not TRUE?

A. One key to customer retention is customer satisfaction

B. Customer satisfaction and customer loyalty are proportional

C. Greater customer satisfaction is linked to lower risk in the stock market

D. Generally, a highly satisfied customer is less sensitive to price



4. Which of the following is not part of the customer development process?

A. ProspectsB. PatronsC. PotentialsD. Partners



The Customer Development Process


Inactive or Ex-customers

Potentials

Prospects

First-timeCustomers

Disqualified

RepeatCustomers

Clients Members Partners




Inactive or Ex-customers

Potentials

Prospects

First-timeCustomers

Disqualified

RepeatCustomers

Clients Members Partners



Potentials – people or organizations who might have an interest in buying the company’s product or service

Prospects – people with motivation, ability, and opportunity to make a purchase

Partners – people who enthusiastically recommend and actively work with the company



4. Which of the following is not part of the customer development process?

A. ProspectsB. PatronsC. PotentialsD. Partners



5. Pizza Hut’s 30-minute delivery guarantee – “If it’s late, it’s free!” - creates what value for the customer?

A. Customer LoyaltyB. Customer SatisfactionC. Customer RetentionD. Product and Service Quality



Creating Customer Value, Satisfaction, and Loyalty


Customer Loyalty- commitment to repurchase or repatronize a preferred product or servicein the future despite situational influences and marketing efforts of competitors

Customer Satisfaction- customers’ feelings of pleasure or disappointment that result from comparinga product’s perceived performance or outcome to their expectations

Customer Retention- exceeding customers’ expectations to become loyal advocates of the productor service

Product and Service Quality- totality of features and characteristics of a product or service that bear on itsability to satisfy stated or implied needs


Creating Customer Value, Satisfaction, and Loyalty


Customer Loyalty- commitment to repurchase or repatronize a preferred product or servicein the future despite situational influences and marketing efforts of competitors

Customer Satisfaction- customers’ feelings of pleasure or disappointment that result from comparinga product’s perceived performance or outcome to their expectations

Customer Retention- exceeding customers’ expectations to become loyal advocates of the productor service

Product and Service Quality- totality of features and characteristics of a product or service that bear on itsability to satisfy stated or implied needs


Customer Satisfaction

In the event that Pizza Hut fails to meet its

guaranteed 30-minute delivery time, to compensate for the disappointment from

the customer and ensure customer

satisfaction, they are willing to give the ordered

product for free 22



5. Pizza Hut’s 30-minute delivery guarantee – “If it’s late, it’s free!” - creates what value for the customer?

A. Customer LoyaltyB. Customer SatisfactionC. Customer RetentionD. Product and Service Quality



6. Which of the following statements is not true?

A. Product and service quality, customer satisfaction, and company profitability are intimately connected

B. The company’s largest customers always yield the most profit

C. The midsize customers who receive good service and pay nearly full price are often the most profitable

D. The customer profit rate increases over the life of a retained customer



Customer Profitability

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 for attracting, selling, and servicing that customer.



The 150-20 Rule


Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall


The 150-20 Rule

The 20% most profitable customers generate

as much as 150% of the profits of a company;

the 20% least profitable lose 100% of the profits.

It’s not always the company’s largest customers who yield the most profit.

The largest customers can demand considerable service and receive the deepest discounts 27



6. Which of the following statements is not true?

A. Product and service quality, customer satisfaction, and company profitability are intimately connected

B. The company’s largest customers always yield the most profit

C. The midsize customers who receive good service and pay nearly full price are often the most profitable

D. The customer profit rate increases over the life of a retained customer



7. What customer value improvement strategy involves businesses giving special treatment to their valuable customers through birthday greetings, small gifts, and invitations to special sports or art events?

A. Reducing the rate of customer defection

B. Increasing the longevity of the customer relationship

C. Enhancing the growth potential of each customer through “share-of-wallet”, cross-selling, and up-selling

D. Focusing disproportionate effort on high-value customers



Increasing Value of the Customer Base

30

Reducing the rate of customer defection- selecting and training employees to be knowledgeable and friendly

Increasing the longevity of the customer relationship- the more involved a customer is with the company, the more likely he is to stick around

Enhancing the growth potential of each customer through “share-of-wallet”, cross-selling, and up-selling- increase sales from existing customers with new offerings and opportunities

Making low-profit customers more profitable or terminating them- to avoid direct termination, marketers can encourage unprofitable customers to buy more or in large quantities

Focusing disproportionate effort on high-value customers- most valuable customers are treated in a special ways- thoughful gestures can send a strong positive signal to the customer



Increasing Value of the Customer Base

31

Reducing the rate of customer defection- selecting and training employees to be knowledgeable and friendly

Increasing the longevity of the customer relationship- the more involved a customer is with the company, the more likely he is to stick around

Enhancing the growth potential of each customer through “share-of-wallet”, cross-selling, and up-selling- increase sales from existing customers with new offerings and opportunities

Making low-profit customers more profitable or terminating them- to avoid direct termination, marketers can encourage unprofitable customers to buy more or in large quantities

Focusing disproportionate effort on high-value customers- most valuable customers are treated in a special ways- thoughful gestures can send a strong positive signal to the customer



7. What customer value improvement strategy involves businesses giving special treatment to their valuable customers through birthday greetings, small gifts, and invitations to special sports or art events?

A. Reducing the rate of customer defection

B. Increasing the longevity of the customer relationship

C. Enhancing the growth potential of each customer through “share-of-wallet”, cross-selling, and up-selling

D. Focusing disproportionate effort on high-value customers



8. A ________ is where marketers can capture, query, and analyze data to draw inferences about individual customer’s needs and responses

A. Customer DatabaseB. Customer Mailing ListC. Business DatabaseD. Data Warehouse



Customer Databases and Database Marketing

34

Customer Database- organized collection of comprehensive information about individual customersor prospects that is current, accessible, and actionable for marketing purposes

Customer Mailing List- a set of names, addresses, and telephone numbers

Business Database- business customers’ past purchases; past volumes, prices, and profits; competitive strengths and weaknesses, and other relevant patterns and policies

Data Warehouse- where marketers can capture, query, analyze data to draw inferences aboutindividual customer’s needs and responses



Customer Databases and Database Marketing

35

Customer Database- organized collection of comprehensive information about individual customersor prospects that is current, accessible, and actionable for marketing purposes

Customer Mailing List- a set of names, addresses, and telephone numbers

Business Database- business customers’ past purchases; past volumes, prices, and profits; competitive strengths and weaknesses, and other relevant patterns and policies

Data Warehouse- where marketers can capture, query, analyze data to draw inferences aboutindividual customer’s needs and responses



8. A ________ is where marketers can capture, query, and analyze data to draw inferences about individual customer’s needs and responses

A. Customer DatabaseB. Customer Mailing ListC. Business DatabaseD. Data Warehouse



9. Which of the following is not true about building customer loyalty?

A. Listening to customers is crucial to customer relationship management

B. Personalization goes beyond creating customized information

C. Monitor customer values over timeD. Supply customers with special

equipment or links to help them manage orders, payroll, and inventory



Customer Loyalty

The commitment to repurchase or repatronize

a preferred product or service in the future

despite situational influences and marketing

efforts of competitors



Four Types of Marketing Activities to Improve Loyalty and Retention

Interacting with Customers Being a customer advocate by listening to customers and

understanding their point of view

Developing Loyalty Programs Helps build long-term loyalty with high customer lifetime

value (CLV), creating cross-selling opportunities in the process

Personalizing Marketing Create strong bonds with customers by individualizing and

personalizing relationships

Creating Institutional Ties Customers are less inclined to switch to another supplier

when this would involve high capital costs or the loss of loyalty discounts



Building Customer Loyalty

A. Listening to customers is crucial to customer relationship management Interacting with Customers

B. Personalization goes beyond creating customized information Personalized Marketing

C. Monitor customer values over timeD. Supply customers with special equipment or

links to help them manage orders, payroll, and inventory Creating Institutional Ties


One of thesteps incustomer valueanalysis. Not a loyalty and retentionmarketing activity.


9. Which of the following is not true about building customer loyalty?

A. Listening to customers is crucial to customer relationship management

B. Personalization goes beyond creating customized information

C. Monitor customer values over timeD. Supply customers with special

equipment or links to help them manage orders, payroll, and inventory



10. PLDT keeps a database of their customers. The company makes sure that the customers get updated with their bill, the latest promos and services, as well as recommend product and service upgrades. The company utilizes their database in such ways except,

A. To identify prospectsB. To decide which customers should

receive a particular offerC. To improve customer satisfactionD. To reactivate customer purchases



Using the Database


To identify prospects- companies sort through a database to identify best prospects and contactsthem by mail, phone, or personal call to try convert them into customers

To decide which customers should receive a particular offer- databases help companies match ideal target customer based on a criteriafor a particular offer

To deepen customer loyalty- build interest and enthusiasm by remembering customer preferences

To reactivate customer purchases- help the company make attractive or timely offers

To avoid serious customer mistakes- updated database of customer inquiries and transactions helps companiesavoid mistakes


Using the Database


To identify prospects- companies sort through a database to identify best prospects and contactsthem by mail, phone, or personal call to try convert them into customers

To decide which customers should receive a particular offer- databases help companies match ideal target customer based on a criteriafor a particular offer

To deepen customer loyalty- build interest and enthusiasm by remembering customer preferences

To reactivate customer purchases- help the company make attractive or timely offers

To avoid serious customer mistakes- updated database of customer inquiries and transactions helps companiesavoid mistakes


PLDT Customer Satisfaction vs. Customer Loyalty

PLDT also ensures customer satisfaction through their 24-

hour customer service assistance and immediate response

team,among many others.

However, for this concept, PLDT tries to deepen customer

loyalty by sending discount coupons and giving reward

points to long-standing and valued customers as indicated in

their customer database. 45http://martha-ballesteros.blogspot.com/


10. PLDT keeps a database of their customers. The company makes sure that the customers get updated with their bill, the latest promos and services, as well as recommend product and service upgrades. The company utilizes their database in such ways except,

A. To identify prospectsB. To decide which customers should

receive a particular offerC. To improve customer satisfactionD. To reactivate customer purchases



TOP 10 Learning Questions for

Chapter 5Creating Customer Value, Satisfaction, and Loyalty

Martha BallesterosDecember 2010

