Deck 1: Customer Focus, Customer Performance and Profit Impact

Question 1

How would a business like Enterprise Rent-A-Car manage its customer focus using the customer-focus behaviors and practices presented in Chapter 1?

Answer 1

A strong customer focus enables the firm to work with a customer centric vision which enhances each and every process of operation in an organization and ultimately results in better services and high level of customer satisfaction. It starts from top to down, when top management along with every employee is customer centric.
A customer focused firm believes that customer satisfaction is the only reason for its existence and vital for its survival in the long run. In such companies customer satisfaction is the part of company's vision. Employees are trained for creating a better customer value and customer feedbacks help in the improvement in company's processes.
Businesses like E R-A-C are customer focused and committed towards complete customer satisfaction. For achieving complete customer satisfaction the company takes interviews from a sample of its customers every month. For employee's motivation towards the company's vision, it promotes only those managers whose sales have above-average levels of customer satisfaction. The company trains its new employees not only for the processes but also for the company's customer focused philosophy.

Question 2

How could a repeat customer with a low lifetime value be more valuable than a repeat customer with a high lifetime value?

Answer 2

Repeat customer with a low lifetime value can be more valuable than a repeat customer with a high lifetime value if the former makes recommendations or referrals about a business or a company to new and potential customers. Owning to such referrals, a company may gain new customers and thus, can save big on marketing and advertising costs, which can be higher than the lifetime value of repeat customers.
Additionally, a company has the opportunity to convert or upgrade such new customers into loyal customers at a relatively lower cost than what it would have incurred to acquire new customers. Therefore, a repeat customer with a low lifetime value can be more valuable than a customer with a high lifetime value.

Question 3

The four interactive marketing performance tools and application exercises outlined here will add to your understanding of the ways customer performance affects profitability. To access them, go to www.MBMBEST.com. You can determine the answers to the questions listed for each marketing performance tool by entering data included in the questions. You can also enter other data to see the results, and you can save your work. Each marketing performance tool is based on the Chapter 1 figure referenced in parentheses.
Customer Satisfaction and Profitability (Figure 1-6)
A. How would average customer sales and average customer profit change for a business with 10 percent "very satisfied" customers, 35 percent "satisfied" customers, and 55 percent "somewhat satisfied" customers?
B. How would the average customer sales and average customer profit change if this business was able to shift customer satisfaction to 35 percent "very satisfied," 35 percent "satisfied," and 30 percent "somewhat satisfied"?

Answer 3

Not Answer

Question 4

How should a first-time machine tool customer be managed differently from a returning customer?

Question 5

Why would a strong customer focus and high levels of customer satisfaction allow Southwest Airlines to be more profitable than other airlines?

Question 6

For an industrial supply company, how could a returning new customer have a higher customer lifetime value than a first-time customer?

Question 7

The four interactive marketing performance tools and application exercises outlined here will add to your understanding of the ways customer performance affects profitability. To access them, go to www.MBMBEST.com. You can determine the answers to the questions listed for each marketing performance tool by entering data included in the questions. You can also enter other data to see the results, and you can save your work. Each marketing performance tool is based on the Chapter 1 figure referenced in parentheses.
Customer Retention (Figure 1-7)
A. How would customer retention change if the percentage of all dissatisfied customers decreased to 15 percent and the percentage of all satisfied customers increased to 85 percent?
B. Using the original data, how would customer retention change if the percentage of customers who complained increased from 10 to 50 percent?

Question 8

Why would a very satisfied Apple Mac customer be more profitable than a somewhat satisfied Apple Mac customer?

Question 9

The four interactive marketing performance tools and application exercises outlined here will add to your understanding of the ways customer performance affects profitability. To access them, go to www.MBMBEST.com. You can determine the answers to the questions listed for each marketing performance tool by entering data included in the questions. You can also enter other data to see the results, and you can save your work. Each marketing performance tool is based on the Chapter 1 figure referenced in parentheses.
Customer Lifetime Value (Figure 1-11)
A. How would the lifetime value of the average customer change if the customer life was shortened from 5 to 4 years?
B. How would the lifetime value change if the customer life was extended from 5 to 6 years and in year 6 the net cash flow was $60?

Question 10

Why would companies with high levels of customer satisfaction produce larger gains in their stock prices than the average S P 500 company?

Question 11

The four interactive marketing performance tools and application exercises outlined here will add to your understanding of the ways customer performance affects profitability. To access them, go to www.MBMBEST.com. You can determine the answers to the questions listed for each marketing performance tool by entering data included in the questions. You can also enter other data to see the results, and you can save your work. Each marketing performance tool is based on the Chapter 1 figure referenced in parentheses.
Customer Loyalty and Profitability (Figure 1-17)
A. How would the average customer profitability change with 25 percent loyal and 25 percent repeat customers?
B. How would the average customer profit change with the following customer loyalty: 30 percent loyal, 35 percent repeat, 5 percent captive, 20 percent new, and 10 percent unprofitable?

Question 12

Lexus is known for high levels of customer satisfaction. How does this affect customer retention over time?

Question 13

If Lexus has an average customer retention of 80 percent, how many purchases does the average customer make over their life as a Lexus customer?

Question 14

If a new coffee company had above-average profits its first couple of years but intentions to repurchase (see Figure 1-9) were declining, with customer retention expected to fall from 67 to 50 percent, what would be the likely impact on future profits?

Question 15

Why would extending the life of an online fashion retail customer from 4 to 5 years affect profits?

Question 16

What makes an Apple customer loyal, and why are loyal customers more profitable than other customers?

Question 17

How could a frequent-flyer airline customer become a captive customer? How do captive airline customers contribute to current and future company profits?

Question 18

How would you manage a repeat McDonald's customer who had a below-average (low) purchase amount?

Question 19

What could cause a business to attract unprofitable customers?