Deck 1: Customer Focus, customer Performance, and Profit Impact

Question 1

The higher the rate of customer retention,the longer the average customer life expectancy and the greater the customer lifetime value.

Answer 1

True

Question 2

A market-based management system views customers as lifetime partners.

Answer 2

True

Question 3

A market-based management business gives its dissatisfied customers as much attention as its "very satisfied" customers.

Answer 3

True

Question 4

The major benefit of a strong customer focus is long-run survival.

Question 5

A business with a short-term perspective lacks a strong consumer focus.

Question 6

The marketing cost of retaining customers is much higher than the cost of replacing them.

Question 7

A business that has a 75 percent customer retention rate has an an average customer life of 6 years.

Question 8

Measures of market performance,such as sales and market share,are backward-looking measures of success or failure.

Question 9

Unrestrained customer acquisition can result in a negative rather than positive impact on profits due to the cost of customer acquisition with little offsetting income.

Question 10

The customer loyalty index (CLI)is a function of total sales,customer lifetime value,and shareholder dividend.

Question 11

In a customer-focused business,________.

A)the senior management sets the tone and sends the signal for a strong customer focus
B)the management views customer complaints as negative feedback and avoids them
C)the analysis of customer feedback is performed only by the senior management
D)the business downplays the importance of customer training for new employees
E)the business is overly focused on building products they assume their customer wants

Question 12

Which of the following events occur when there is minimal focus on customers?

A)high customer loyalty
B)reduction in customer turnover
C)below-average profits
D)long-run strategies to improve sales
E)low cost of marketing and sales

Question 13

Asset turnover in an organization is an example of internal company metrics.

Question 14

The end result of underwhelming customers and shareholders is ________.

A)an unfocused value proposition
B)a higher pressure for short-run results
C)an above-average profit performance
D)a low rate of customer turnover
E)a high level of customer loyalty

Question 15

Which of the following is an example of a company's external metrics?

A)return on sales
B)employee turnovers
C)manufacturing defects
D)late deliveries
E)retaining customers

Question 16

Which of the following is true of businesses with a strong customer focus?

A)A customer-focused business lacks a long-term perspective.
B)A customer-focused business realizes higher profits over the short-term.
C)In a customer-focused business,shareholders are more interested in long-run survival than immediate earnings.
D)In a customer-focused business,managers are usually judged on the last quarter's results,and not not on their efforts to ensure the long-run survival of the business.
E)A customer-focused business is in synch with customers' needs and requirements,not with competitors' strategies.

Question 17

Minimal customer focus results in a reduction in the cost of marketing and sales.

Question 18

A repeat customer buys a lot from many companies and does not have a strong preference for one over the other.

Question 19

The life expectancy of a customer decreases exponentially as a business moves to higher levels of customer retention.

Question 20

Captive customers are a drain on a business's profits because the cost of acquiring them can never be recovered.

Question 21

What is the main reason that a business suffers several economic consequences when a dissatisfied customer leaves?

A)The cost of attracting a new customer is greater than retaining a current customer.
B)The business's competitors enjoy a greater customer loyalty toward the same type of products.
C)The amount of money spent on developing the product for the dissatisfied customer cannot be reimbursed.
D)The business has to pay a large compensation fee to the customer.
E)The future costs for the development of a similar product increases abruptly.

Question 22

A business determines that 75% of its customers are satisfied.This business also learns that 80% of a leading competitor's customers are satisfied.If this business implements a program to reach 80% customer satisfaction,this is called ________.

A)competitive parity
B)focused value proposition
C)managing to the averages
D)wide-angle view of customer satisfaction
E)forward-looking indicator

Question 23

Which of the following statements is true about customer retention and customer life expectancy?

A)The higher the customer retention rate,the lower the short-term profit impact.
B)As customer retention increases,the customer's life expectancy decreases.
C)Customer life expectancy decreases exponentially with customer retention.
D)In general,it costs five times more to replace than to keep a customer.
E)Higher levels of customer retention have a long-term negative impact on profits.

Question 24

The most significant impact of satisfying and retaining customers is ________.

A)that a business can redirect marketing efforts to better serve dissatisfied customers
B)that a business can redirect marketing efforts to attaining new customers
C)that a desired increase in the level of profitability requires an increase in sales volume of only half as much
D)that a business can eliminate the need for advertising
E)that it can result in tremendous financial leverage

Question 25

What type of customers are most likely known as "customer terrorists"?

A)customers who use their bargaining powers to purchase products at a cheaper price
B)customers who engage in shoplifting
C)customers who verbally communicate their bad experiences to others
D)customers who show a false sense of loyalty to a particular brand
E)customers who only buy the product if it is offered at an attractive price or with a promotional incentive

Question 26

To estimate the lifetime value of a customer at a given rate of customer retention,you need to compute the ________.

A)net present value of the customer's cash flow
B)customer satisfaction index
C)future customer value
D)customer loyalty index
E)gross percent margin of the company

Question 27

To create an overall customer satisfaction index (CSI)for a given sample of customers,a business ________.

A)computes the average of those customers' satisfaction ratings
B)sums all of those customers' satisfaction ratings
C)computes the average of those customers' satisfaction ratings and divides it by the industry average
D)computes the sum of those customers' satisfaction ratings and divides it by a leading competitor's customer satisfaction index
E)sums all of those customers' satisfaction ratings and divides it by 100

Question 28

What change in customer retention results from an increase from 5 to 10 years of an average customer life?

A)a decrease of 5%
B)an increase of 5 %
C)an increase of 10%
D)a decrease of 10%
E)the value remains the same

Question 29

What is the customer retention for a company given an average customer life of two years?

A)40%
B)50%
C)75%
D)80%
E)100%

Question 30

A market-based business looks at customers as ________.

A)lifetime partners
B)individual purchase transactions
C)conquests
D)short-term relationships
E)extraneous variables

Question 31

With reference to the six-category scale,a consumer satisfaction index (CSI)of 60 denotes that the customer is ________.

A)dissatisfied
B)satisfied
C)very satisfied
D)somewhat dissatisfied
E)somewhat satisfied

Question 32

Customers with ________ customer satisfaction ratings are profitable but are below the average customer profitability.

A)Very satisfied
B)Dissatisfied
C)Somewhat dissatisfied
D)Satisfied
E)Somewhat satisfied

Question 33

With reference to the six-category scale,a consumer satisfaction index (CSI)of 20 denotes that the customer is ________.

A)dissatisfied
B)satisfied
C)very satisfied
D)somewhat dissatisfied
E)somewhat satisfied

Question 34

Which of the following is a forward-looking indicator of business success?

A)customer satisfaction
B)shareholder dividends
C)sales
D)market share
E)ROI

Question 35

What is the relation between the customer retention (CR)and average customer life (N)?

A)CR=1/N
B)CR=1+(1/N)
C)CR=N/2
D)CR=(N-1)/2
E)CR= 1-(1/N)

Question 36

An increase from 80% to 90% in customer retention would have what effect on the average customer life?

A)an increase of 1 year
B)an increase of 2 years
C)an increase of 5 years
D)an increase of 10 years
E)an increase of 20 years

Question 37

Which of the following is a component of customer loyalty index?

A)customer satisfaction
B)average customer life
C)customer's income level
D)desire to repurchase
E)customer's demographic details

Question 38

In general,it costs ________ times more to replace a customer than it costs to keep a customer.

A)two
B)three
C)four
D)five
E)six

Question 39

Customer life expectancy increases ________ with customer retention.

A)exponentially
B)linearly
C)cubically
D)parabolically
E)hyperbolically

Question 40

The average life expectancy of a customer for a company with 75% customer retention is ________.

A)1 year
B)2 years
C)3 years
D)4 years
E)5 years

Question 41

Which of the following is true of unprofitable customers?

A)They produce a referral value that is over three times their customer lifetime value.
B)They are loyal customers in waiting.
C)They buy a lot from many companies and do not have a strong preference for one over the other.
D)They have a low desire to repurchase but are unable to move easily to another company's product.
E)They are a result of mismanaged customer selection.

Question 42

Captive customers differ from unprofitable customers in that captive customers ________.

A)are the result of mismanaged customer selection
B)are simply "big spenders"
C)are a drain on a business's profits because the cost of acquiring them can never be recovered
D)have a low desire to repurchase but are unable to move easily to another company's product
E)produce a referral value that is over three times their customer lifetime value

Question 43

MINI-CASE
Your brother,Fred,owns ATZ Inc. ,a company that provides wireless telecommunications network in several cities in the Midwest region.You are taking a marketing class in college,and you asked Joe for some information about his business for a class project.You determined that one of his customers has a long customer history of 75,an above-average purchase amount of 55,a low repurchase desirability of 20,a weak product preference of 10,and the customer does not recommend ATZ services to potential customers.The customer is clearly dissatisfied,but since ATZ Inc.is the only wireless telecommunications network provider in the city he is compelled to use it.
Mini-Case Question.Based on the customer loyalty index (CLI)for the customer,what type of customer would you tell Fred that he has?

A)loyal customer
B)repeat customer
C)captive customer
D)new customer
E)unprofitable customer

Question 44

________ are customers who buy because a product is being offered at an attractive price or with a promotional incentive.

A)Top performers
B)Underachievers
C)High potential customers
D)Misfits
E)Spinners

Question 45

MINI-CASE
Your brother,Fred,owns ATZ Inc. ,a company that provides wireless telecommunications network in several cities in the Midwest region.You are taking a marketing class in college,and you asked Joe for some information about his business for a class project.You determined that one of his customers has a long customer history of 75,an above-average purchase amount of 55,a low repurchase desirability of 20,a weak product preference of 10,and the customer does not recommend ATZ services to potential customers.The customer is clearly dissatisfied,but since ATZ Inc.is the only wireless telecommunications network provider in the city he is compelled to use it.
Mini-Case Question.Based on the values provided,determine the customer loyalty index.

A)28
B)32
C)36
D)40
E)44

Question 46

Julio lives in Summit County,in Colorado.He has taken health insurance from Pro-Life Inc. ,a health maintenance organization in Colorado that has a network of health care providers.Julio can visit the health care providers in the Pro-Life Inc.network,and get services at much lower rates.Julio regularly visits Dr.Amy Page,the best general physician in the Pro-Life Inc.network in Summit County even though he is not satisfied with her services.When any his friend require medical services,Julio does not recommend Dr.Amy Page to them.For Dr.Amy Page,Julio is a(n)________ customer.

A)intermediate
B)loyal
C)captive
D)repeat
E)unprofitable

Question 47

Customers for whom the offerings of the current business do not fit their needs are called ________.

A)misfits
B)spinners
C)captive customers
D)customer terrorists
E)underachievers

Question 48

Which of the following is true of new customers?

A)They are usually the profit driver of a business.
B)They are a company's best customers.
C)They have no impact on the net marketing contribution.
D)They are less likely to recommend a company's product to others.
E)They generally buy more than retained customers.

Question 49

Sally always purchases groceries at Dillard's Department store.Every time she visits the store,she spends exorbitant amounts on various items.Sally seldom recommends Dillard's Department store to her friends and acquaintances.The marketing manager at Dillard's calculates that she has a loyalty index of 50,and an average lifetime value.To Dillard's,Sally is a(n)________ customer.

A)captive
B)loyal
C)unprofitable
D)repeat
E)intermediate

Question 50

Which of the following groups of customers are most likely to have high desire to repurchase,strong product preference,long customer history,and a very high referral value?

A)Loyal customers
B)Captive customers
C)Unprofitable customers
D)Repeat customers
E)Customer terrorists

Question 51

Simmons Inc.is an American firm that manufactures and distributes a line luxury furniture under the brand name Elegant Living.The firm measures the loyalty levels of its customers and classifies them into the different groups based on their loyalty index.Which of the following customers are most likely to be classified as spinners by Simmons Inc.?

A)Customers who have a loyalty score between 50 to 69.
B)Customers who purchase an Elegant Living furniture one time because of an attractive discount.
C)Customers who are first-time buyers.
D)Customers who are likely to recommend Elegant Living furniture to potential buyers.
E)Customers who buy a lot of Elegant Living products as well as products from other furniture brands.

Question 52

Calculate the customer loyalty index if the customer history is 12,the purchase amount is 38,the desire to repurchase is 50,the product preference is 20,and there is no customer recommendation.

A)30
B)24
C)50
D)65
E)92

Question 53

Repeat customers differ from loyal customers in that repeat customers ________.

A)have a loyalty score between 70 and 100
B)have a high product preference score
C)are likely to recommend a company's product
D)are often simply "big spenders"
E)have low profit potential

Question 54

________ are most likely to recommend a company's product to others.

A)Loyal customers
B)Captive customers
C)New customers
D)Repeat customers
E)Customer terrorists

Question 55

Calculate the customer loyalty index if the customer history is average,the purchase amount is below average,the desire to repurchase is high,the product preference is strong,and there is no customer recommendation.

A)0
B)10
C)50
D)80
E)100

Question 56

Which of the following types of customers should be rewarded with special offers and services that are not offered to other customers?

A)loyal customers
B)nonprofit customers
C)new customers
D)dissatisfied customers
E)repeat customers

Question 57

A captive customer is most likely to ________.

A)have a low purchase amount
B)recommend a brand or company to others
C)have a weak product preference
D)have a high customer loyalty index
E)have a high desire to repurchase

Question 58

Explain the classification of customer loyalties and the contrasts in their range of behaviors.

Question 59

Which of the following types of customers generally have the lowest customer history?

A)new customers
B)captive customers
C)loyal customers
D)unprofitable customers
E)repeat customers

Question 60

Describe the process that results in "underwhelmed" customers and shareholders.

Question 61

MINI-CASE
Your brother,Fred,owns ATZ Inc. ,a company that provides wireless telecommunications network in several cities in the Midwest region.You are taking a marketing class in college,and you asked Joe for some information about his business for a class project.You determined that one of his customers has a long customer history of 75,an above-average purchase amount of 55,a low repurchase desirability of 20,a weak product preference of 10,and the customer does not recommend ATZ services to potential customers.The customer is clearly dissatisfied,but since ATZ Inc.is the only wireless telecommunications network provider in the city he is compelled to use it.
Mini-Case Question.If the same customer has a high repurchase desirability,a strong product preference,and recommends ATZ wireless telecommunications services to his friends and acquaintances,what type of customer would he be?

A)a new customer
B)a captive customer
C)an unprofitable customer
D)a repeat customer
E)a loyal customer