Marketing Management, 14e (Kotler/Keller) Chapter Creating Long-Term Loyalty Relationships 1) Which of the following is true for the modern company organization chart? A) Frontline employees are less important than top management B) Customers are at the top of the pyramid C) Top management is at the top of the pyramid D) Customers are less important than middle management E) Frontline employees are at the top of the pyramid Answer: B Page Ref: 124 Objective: AACSB: Reflective thinking Difficulty: Easy 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 Page Ref: 124 Objective: Difficulty: Easy 3) In a modern customer-oriented organization chart, the of an organization immediately follow the customer segment A) top management B) marketing department C) middle management D) frontline people E) lower management Answer: D Page Ref: 124 Objective: AACSB: Analytic skills Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 4) is the difference between the prospective customer's evaluation of all the benefits and all the costs of an offering and the perceived alternatives A) Perceived usefulness B) Failure avoidance rate C) Total customer benefit D) Customer-perceived value E) Competitors' market share rate Answer: D Page Ref: 125 Objective: AACSB: Analytic skills Difficulty: Easy 5) When a consumer considers a product or service, he or she will choose whichever product or service delivers the highest A) customer-perceived value B) customer-perceived cost C) customer profitability analysis D) customer equity E) customer lifetime value Answer: A Page Ref: 125 Objective: AACSB: Analytic skills Difficulty: Easy 6) is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering A) Total customer cost B) Total customer benefit C) Total benefits of ownership D) Value proposition E) Value delivery system Answer: B Page Ref: 125 Objective: AACSB: Analytic skills Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 7) The bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of the given market offering is called the A) activity-based cost B) customer profitability analysis C) total customer cost D) product life-cycle cost E) direct product profitability Answer: C Page Ref: 125 Objective: AACSB: Analytic skills Difficulty: Easy 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 Page Ref: 125 Objective: Difficulty: Easy 9) Which of the following is the first step in customer value analysis? A) Examine how customers in a specific segment rate the company's performance B) Assess the company's and competitors' performances on the different customer values against their rated importance C) Identify the major attributes and benefits that customers value D) Monitor customer values over time E) Assess the quantitative importance of the different attributes and benefits Answer: C Page Ref: 126 Objective: Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 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 Page Ref: 126 Objective: Difficulty: Easy 11) Cell phone manufacturer LZT has to choose between two options for sourcing parts: Japanbased Keiko Inc and U.S.-based Global Tech How can Keiko reduce the total customer cost for LZT? A) absorbing some risk by offering a warranty B) improving the functional aspects of the products C) augmenting the psychological benefits of the products D) training service personnel to improve their skills E) investing in brand building for the products Answer: A Page Ref: 126 Objective: AACSB: Analytic skills Difficulty: Moderate 12) can be defined as a deeply held commitment to rebuy or repatronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior A) Value proposition B) Loyalty C) Satisfaction D) Respect E) Customer value Answer: B Page Ref: 127 Objective: Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 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 Page Ref: 127 Objective: AACSB: Analytic skills Difficulty: Moderate 14) A company's includes all the experiences the customer will have on the way to obtaining and using the offering A) value proposition B) value delivery system C) customer-value analysis D) total customer benefit E) total customer cost Answer: B Page Ref: 127 Objective: AACSB: Analytic skills Difficulty: Easy 15) Sammy's is a fast food chain that offers burgers, sandwiches, and shakes It focuses its marketing efforts on all the experiences the customers will have on the way to obtaining their food order and eating it Hence, Sammy's is focusing its marketing efforts on its A) horizontal marketing system B) cost versus benefit system C) consumption system D) marketing channel system E) value delivery system Answer: E Page Ref: 127 Objective: AACSB: Analytic skills Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 16) Total customer satisfaction is measured based on the relationship of A) expected value and total customer benefit B) perceived performance and expectation C) advertised outcomes and real outcomes D) past experience and present experience E) customer attitude and salesperson's attitude Answer: B Page Ref: 128 Objective: AACSB: Reflective thinking Difficulty: Easy 17) Which of the following is true for customer satisfaction? A) Satisfaction is a deeply held commitment to rebuy or repatronize a preferred product despite situational influences B) Consumers often form more favorable perceptions of a product with a brand that is new C) The ultimate goal of a customer-centered firm is to create high customer satisfaction D) Only increased customer satisfaction can help a company increase its profits E) Greater customer satisfaction has also been linked to higher returns and lower risk in the stock market Answer: E Page Ref: 128 Objective: Difficulty: Easy 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 Page Ref: 129 Objective: AACSB: Analytic skills Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 19) Field Grocery wants to learn the strengths and weaknesses in customer service at all the Field Grocery stores Which of the following methods can it use for this? A) group buyers B) buyer brokers C) mystery shoppers D) personal shoppers E) buying agents Answer: C Page Ref: 129 Objective: Difficulty: Easy 20) Of customers who register a complaint, A) all will business with the company again because they are unwilling to dedicate the effort required to find another vendor B) none will 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 business with the company again if their complaint is resolved Answer: E Page Ref: 131 Objective: Difficulty: Easy 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 Page Ref: 131 Objective: Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 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 Page Ref: 131 Objective: AACSB: Analytic skills Difficulty: Easy 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 Page Ref: 131 Objective: Difficulty: Easy 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 Page Ref: 131 Objective: AACSB: Analytic skills Difficulty: Moderate Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 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 Page Ref: 132 Objective: AACSB: Analytic skills Difficulty: Easy 26) A profitable customer A) yields a cost stream that exceeds by an acceptable amount his revenue stream B) yields a revenue stream that exceeds the company's cost stream C) yields a cost stream that exceeds the company's revenue stream D) yields a revenue stream that exceeds by an acceptable amount his cost stream E) yields a revenue stream that equals the company's cost stream Answer: B Page Ref: 133 Objective: Difficulty: Easy 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 Page Ref: 133 Objective: AACSB: Analytic skills Difficulty: Easy Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 28) Customer profitability analysis (CPA) is best conducted with the tools of an accounting technique called A) input-output analysis B) factor analysis C) revenue-based costing D) activity-based costing E) future date costing Answer: D Page Ref: 133 Objective: AACSB: Reflective thinking Difficulty: Easy 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 Page Ref: 133 Objective: Difficulty: Easy 30) describes the net present value of the stream of future profits expected over the customer's lifetime purchases A) Activity-based costing B) Customer lifetime value C) Customer value analysis D) Customer-perceived value E) Customer profitability analysis Answer: B Page Ref: 134 Objective: AACSB: Analytic skills Difficulty: Easy 31) The aim of customer relationship management is to produce high customer A) integrity B) loyalty C) innovation D) liability E) equity Answer: B Page Ref: 135 Objective: Difficulty: Easy 10 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 74) Total customer cost consists of only the non-monetary costs in evaluating, obtaining, using, and disposing of the given market offering Answer: FALSE Page Ref: 125 Objective: AACSB: Analytic skills Difficulty: Easy 75) Customer-perceived value is the perceived monetary value of all the purchases a customer makes on an annual basis Answer: FALSE Page Ref: 125 Objective: AACSB: Analytic skills Difficulty: Easy 76) A seller who is at a disadvantage has two alternatives: decrease total customer benefit or increase total customer cost Answer: FALSE Page Ref: 126 Objective: AACSB: Analytic skills Difficulty: Easy 77) The value proposition is stated in the price of a product and readily recognized by the average consumer Answer: FALSE Page Ref: 127 Objective: AACSB: Analytic skills Difficulty: Easy 78) The value delivery system includes all the experiences the customer will have on the way to obtaining and using the offering Answer: TRUE Page Ref: 127 Objective: AACSB: Analytic skills Difficulty: Easy 79) The value proposition is also known as the core positioning of the offering Answer: FALSE Page Ref: 127 Objective: AACSB: Analytic skills Difficulty: Easy 24 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 80) Loyalty is a person's feelings of pleasure or disappointment that result from comparing a product's perceived performance to expectations Answer: FALSE Page Ref: 128 Objective: AACSB: Reflective thinking Difficulty: Easy 81) Customer satisfaction is the only way by which a firm can increase its profitability Answer: FALSE Page Ref: 128 Objective: AACSB: Analytic skills Difficulty: Easy 82) Consumers' expectations result exclusively from past buying experiences Answer: FALSE Page Ref: 128 Objective: Difficulty: Easy 83) The best thing a company can in the face of company mistakes is to discourage the customer from complaining Answer: FALSE Page Ref: 131 Objective: AACSB: Reflective thinking Difficulty: Easy 84) Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs Answer: TRUE Page Ref: 131 Objective: AACSB: Analytic skills Difficulty: Easy 85) Conformance quality and performance quality are identical in the marketing sense Answer: FALSE Page Ref: 131 Objective: AACSB: Analytic skills Difficulty: Easy 25 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 86) Two products with very different performance qualities can have the same conformance quality if both products deliver their respective promised quality Answer: TRUE Page Ref: 131 Objective: AACSB: Analytic skills Difficulty: Easy 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 Page Ref: 133 Objective: AACSB: Analytic skills Difficulty: Easy 88) A customer's profitability is judged on the basis of the lifetime stream of revenue and cost, not the profit from a particular transaction Answer: TRUE Page Ref: 133 Objective: AACSB: Reflective thinking Difficulty: Easy 89) Unprofitable customers who defect to a competitor should be encouraged to so Answer: TRUE Page Ref: 133 Objective: AACSB: Reflective thinking Difficulty: Easy 90) Customer profitability analysis is best conducted with the tools of an accounting technique called activity-based costing Answer: TRUE Page Ref: 133 Objective: Difficulty: Easy 91) Activity-based costing tries to identify the real costs associated with serving each customer Answer: TRUE Page Ref: 133 Objective: AACSB: Analytic skills Difficulty: Easy 26 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 92) Activity-based costing does not consider indirect, variable and overhead costs Answer: FALSE Page Ref: 133 Objective: AACSB: Reflective thinking Difficulty: Easy 93) Customer lifetime value describes the net present value of the stream of future profits expected over the customer's lifetime purchases Answer: TRUE Page Ref: 134 Objective: AACSB: Analytic skills Difficulty: Easy 94) The aim of customer relationship management is to keep the costs of meeting and tracking consumers as low as possible Answer: FALSE Page Ref: 135 Objective: AACSB: Reflective thinking Difficulty: Easy 95) A customer touch point is the time when the customer makes a purchase Answer: FALSE Page Ref: 135 Objective: AACSB: Analytic skills Difficulty: Easy 96) Permission marketing presumes that consumers know what they want Answer: TRUE Page Ref: 137 Objective: AACSB: Reflective thinking Difficulty: Easy 97) All companies should practice one-to-one marketing Answer: FALSE Page Ref: 137 Objective: Difficulty: Easy 27 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 98) Customer churn is how rapidly a store can move customers through its checkout facility or process Answer: FALSE Page Ref: 139 Objective: Difficulty: Easy 99) For a magazine, subscription renewal rate is a good measure of retention Answer: TRUE Page Ref: 139 Objective: Difficulty: Easy 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 Page Ref: 140 Objective: Difficulty: Easy 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 Page Ref: 140 Objective: Difficulty: Easy 102) The marketing funnel identifies the profitability of consumers at each stage in the decision process Answer: FALSE Page Ref: 140 Objective: AACSB: Analytic skills Difficulty: Easy 103) Focusing disproportionate effort on high-profit customers will lead to lower customer profitability for those customers Answer: FALSE Page Ref: 141 Objective: Difficulty: Easy 28 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 104) Frequency programs are designed to reward customers who buy frequently and in substantial amounts Answer: TRUE Page Ref: 142 Objective: AACSB: Reflective thinking Difficulty: Easy 105) Clubs that are open to everyone who purchases a product or service are good for building a customer database Answer: TRUE Page Ref: 142 Objective: Difficulty: Easy 106) It's often easier to reattract ex-customers than to find new ones because the company knows their names and histories Answer: TRUE Page Ref: 143 Objective: AACSB: Reflective thinking Difficulty: Easy 107) A customer database is simply a listing of a customer's name, address, and phone number for credit reference Answer: FALSE Page Ref: 143 Objective: Difficulty: Easy 108) Cluster analysis is a statistical technique that can be employed in data mining Answer: TRUE Page Ref: 144 Objective: AACSB: Analytic skills Difficulty: Easy 109) Building a customer database is not recommended when the product is a once-in-a-lifetime purchase Answer: TRUE Page Ref: 145 Objective: AACSB: Analytic skills Difficulty: Easy 29 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 110) Loyal customers are the best ambassadors for a brand Answer: FALSE Page Ref: 146 Objective: Difficulty: Easy 111) Compare and contrast the typical traditional organization chart for an organization against the modern customer-oriented organization chart Answer: The traditional organization chart is a pyramid with the president at the top, management in the middle, and frontline people and customers at the bottom In this case, the top management is the most important part of an organization Managers who believe the customer is the company's only true "profit center" consider the traditional organization chart obsolete In the modern customer-oriented organization chart, customers are at the top, followed by frontline people, then middle management, and, lastly, top management Page Ref: 124 Objective: AACSB: Analytic skills Difficulty: Easy 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 Page Ref: 125 Objective: Difficulty: Easy 30 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 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: Identify the major attributes and benefits customers value Assess the quantitative importance of the different attributes and benefits Assess the company's and competitors' performances on the different customer values against their rated importance Examine how customers in a specific segment rate the company's performance against a specific major competitor on an individual attribute or benefit basis Monitor customer values over time Page Ref: 126 Objective: Difficulty: Easy 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 Page Ref: 128 Objective: Difficulty: Easy 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 Page Ref: 129-130 Objective: Difficulty: Easy 31 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 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 Set up a 24/7 toll-free "hotline" to receive and act on customer complaints Contact the complaining customer as quickly as possible Accept responsibility for the customer's disappointment Use customer-service people who are empathic Resolve the complaint swiftly and to the customer's satisfaction Page Ref: 131 Objective: AACSB: Analytic skills Difficulty: Easy 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 Page Ref: 133 Objective: Difficulty: Easy 118) Explain permission marketing Answer: Permission marketing is the practice of marketing to consumers only after gaining their expressed permission and is based on the premise that marketers can no longer use "interruption marketing" via mass media campaigns Marketers can develop stronger consumer relationships by respecting consumers' wishes and sending messages only when they express a willingness to become more involved with the brand However, permission marketing, like other personalization approaches, presumes consumers know what they want Page Ref: 136-137 Objective: Difficulty: Easy 32 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 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: The company must define and measure its retention rate The company must distinguish the causes of customer attrition and identify those that can be managed better The company must compare the lost profit equal to the customer lifetime value from a lost customer to the costs to reduce the defection rate Page Ref: 139-140 Objective: AACSB: Analytic skills Difficulty: Easy 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: Reducing the rate of customer defection Increasing the longevity of the customer relationship Enhancing the growth potential of each customer through "share-of-wallet," cross-selling, and up-selling Making low-profit customers more profitable or terminating them Focusing disproportionate effort on high-value customers Page Ref: 140-141 Objective: AACSB: Reflective thinking Difficulty: Easy 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: Some situations are just not conducive to database management Building and maintaining a customer database requires a large, well-placed investment in computer hardware, database software, analytical programs, communication links, and skilled staff It may be difficult to get everyone in the company to be customer oriented and use the available information Not all customers want a relationship with the company The assumptions behind CRM may not always hold true Page Ref: 145-146 Objective: Difficulty: Easy 33 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 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 Page Ref: 124 Objective: AACSB: Analytic skills Difficulty: Moderate 123) Cell phone manufacturer LZT has to choose between two options for sourcing parts: Japanbased 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 to obtain LZT's order? Answer: Student answers may vary Keiko can increase total customer benefit by improving economic, functional, and psychological benefits of its product, services, people, and image It can reduce LZT's nonmonetary costs by reducing the time, energy, and psychological investment It can also further reduce its product's monetary cost Page Ref: 125 Objective: AACSB: Analytic skills Difficulty: Moderate 124) Cell phone manufacturer LZT has to choose between two options for sourcing parts: Japanbased Keiko Inc and U.S.-based Global Tech How can Keiko reduce the total customer cost for LZT? Answer: Keiko can reduce the price or cost of ownership and maintenance, simplify the ordering and delivery process, or absorb some buyer risk by offering a warranty Page Ref: 126 Objective: AACSB: Analytic skills Difficulty: Moderate 125) Create a value proposition for cell phone manufacturer LZT Answer: Student answers may vary LZT's value proposition could include good quality, reliable battery life, excellent design and style Page Ref: 127 Objective: AACSB: Analytic skills Difficulty: Moderate 34 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 126) Shoe retail chain Berry's has noticed an increase in complaints about customer service at its stores and is beginning to lose customers to competitors The company needs to identify the problems and rectify them Give two methods Berry's can use to discover the problem Answer: Periodic surveys can track customer satisfaction directly and ask additional questions about the quality of customer service Berry's can hire mystery shoppers to pose as potential buyers and report on strong and weak points experienced in buying the company's and competitors' products Page Ref: 129 Objective: AACSB: Analytic skills Difficulty: Moderate 127) Give an example of two products that have different performance quality but are of equal conformance quality Answer: Student answers may vary Performance quality is the quality of the product's attributes Conformance quality is the extent to which the product delivers the performance quality promised to consumers A Sony Ericsson mobile cell phone provides higher performance quality than a Nokia The Sony Ericsson mobile has more features and lasts longer than a Nokia mobile cell phone Yet both would deliver the same conformance quality if both delivered their respective promised quality Page Ref: 131 Objective: AACSB: Analytic skills Difficulty: Moderate 128) Berry's is a chain of shoe stores The company recently reviewed its customer relations strategy and suggested that the brand communication be consistent across all customer touch points What are the various touchpoints for Berry's? Answer: Student answers may vary Berry's touch points can include the stores' sales staff, point-of-purchase advertising, the company Web site, the packaging of the products, the company's advertising and promotional messages Page Ref: 135 Objective: AACSB: Analytic skills Difficulty: Moderate 129) Give an example of how a hotel can generate customer loyalty at a "customer touch point" Answer: Student answers may vary An example of customer touch point would be when a hotel offers its guests something to drink upon arrival before they check in, or when the staff places chocolates on pillows and face towels twisted into the shape of animals on beds Page Ref: 135 Objective: AACSB: Analytic skills Difficulty: Moderate 35 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 130) Berry's is a chain of shoe stores The marketing team suggested that the company use permission marketing instead of interruption marketing How can this benefit the company? Answer: Student answers may vary Using permission marketing, the practice of marketing to consumers only after gaining their expressed permission, Berry's can develop stronger consumer relationships by respecting consumers' wishes and sending messages only when they express a willingness to become more involved with the brand Page Ref: 136-137 Objective: AACSB: Analytic skills Difficulty: Moderate 131) Uncle Jim's is a brand of ready-to-eat snacks that is widely distributed in supermarkets and stores across the country Should Uncle Jim's opt for one-to-one marketing? Give reasons for your answer Answer: Student answers may vary One-to-one marketing is unlikely to profit Uncle Jim's One-to-one marketing works best for companies that normally collect a great deal of individual customer information, carry a lot of products that can be cross-sold, carry products that need periodic replacement or upgrading, and sell products of high value Page Ref: 137 Objective: AACSB: Analytic skills Difficulty: Moderate 132) Bicycle store 2Wheels wants to maximize sales from each customer The marketing team suggests that 2Wheels uses cross-selling techniques How can the company implement this technique? Answer: 2Wheels can use cross-selling techniques by stocking products related to bicycles, such as cycling gear, bottles, lamps and other accessories Page Ref: 141 Objective: Difficulty: Easy 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 to make these customers more profitable? Answer: 2Wheels can encourage unprofitable customers to buy more or in larger quantities, forgo certain features or services, or pay higher amounts or fees It can also use cross-selling or up-selling techniques Page Ref: 141 Objective: Difficulty: Easy 36 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 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 to ensure this? Answer: Student answers may vary 2Wheels can institute membership fees and membership conditions to ensure that only members with a lasting interest join the club Page Ref: 142 Objective: Difficulty: Easy 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: Student answers may vary Keiko can supply LZT with special equipment or computer links that help them manage orders, payroll, and inventory Customers are less inclined to switch to another supplier when it means high capital costs, high search costs, or the loss of loyal-customer discounts Page Ref: 143 Objective: Difficulty: Easy 136) Sara is the marketing manager of a small HR consultancy firm She is in the process of implementing the use of a database to assist her company in its marketing efforts List five ways in which she might be able to use the database for marketing efforts Answer: Sara can use a database for marketing efforts in five ways These include: (1) identifying prospects; (2) deciding which customers should receive a particular offer; (3) strengthening customer loyalty; (4) reactivating customer purchases; and (5) avoiding serious customer mistakes Page Ref: 144-145 Objective: AACSB: Analytic skills Difficulty: Moderate 137) CJ's is a clothes retailer that grew from a single store into a chain over a few years The key service characteristic during CJ's early years was a personalized customer relationship, and the company continues to collect information about its customers and maintain a database Recently, however, CJ's has been losing customers to competitors as the expansion has made it difficult to personalize services How can CJ's use its customer database to reactivate customer purchases? Answer: CJ's can install automatic mailing programs that send out birthday or anniversary cards, Christmas shopping reminders, or off-season promotions The company can use the database to make attractive or timely offers to its customers based on their preferences Page Ref: 145 Objective: AACSB: Analytic skills Difficulty: Moderate 37 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall 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: Student answers may vary 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 Page Ref: 145 Objective: AACSB: Analytic skills Difficulty: Moderate 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: Some situations are just not conducive to database management Building and maintaining a customer database requires a large, well-placed investment in computer hardware, database software, analytical programs, communication links, and skilled staff It may be difficult to get everyone in the company to be customer oriented and use the available information Not all customers want a relationship with the company The assumptions behind CRM may not always hold true Page Ref: 145-146 Objective: AACSB: Analytic skills Difficulty: Moderate 140) Using an example, contrast behavioral loyalty and attitudinal loyalty to a product Answer: Student answers will vary 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 Page Ref: 146 Objective: Difficulty: Easy 38 Copyright © 2012 Pearson Education, Inc Publishing as Prentice Hall ... willingness to become more involved with the brand A) Relationship marketing B) Permission marketing C) Cause marketing D) Defensive marketing E) Horizontal marketing Answer: B Page Ref: 136-137 Objective:... 1 35 Objective: AACSB: Reflective thinking Difficulty: Easy 37) is based on the premise that marketers can no longer use "interruption marketing" via mass media campaigns A) Relationship marketing. .. mass media campaigns A) Relationship marketing B) Permission marketing C) Database marketing D) Internet marketing E) Horizontal marketing Answer: B Page Ref: 136 Objective: AACSB: Reflective