Deck 16: Customer Retention and Maximization

Question 1

Satisfaction,by definition,is impossible to accurately measure and is,therefore,of little/no use for practical decision-making.

Answer 1

False

Question 2

Modularity means the system is composed of distinct subsystems or components.

Answer 2

True

Question 3

In the evolution of business relationships it's common for parties to interact at equivalent organizational levels.

Answer 3

True

Question 4

Switching costs may temporarily "tie" a buyer to a less-than-acceptable supplier.

Question 5

Superior performance,social ties and all other means of cementing relationships are used exclusively on an either or basis.

Question 6

Satisfaction studies can be done by Web,telephone or mail,but the typical high level of detail favors mail.

Question 7

The standards for preferred supplier are the same for all firms and often include quality programs,employee safety and training efforts and delivery specifications.

Question 8

"Running" a relationship involves the values,personnel and systems dedicated to maintaining a high-performance relationship.

Question 9

Always-a-share and lost-for-good represent polar ends of a continuum of exchange situations.

Question 10

Proactive satisfaction measures are necessary for firms because many customers don't take the time to register complaints with a supplier and allow problems to be addressed; they simply switch suppliers.

Question 11

Satisfaction surveys add value to the system of relationship communication only when used in isolation.

Question 12

Switching costs are the forgone value of investments plus economic penalties and other expenses associated with finding,evaluating and using a new supplier.

Question 13

Firms have to stay in a relationship when there are no alternatives or when technical features of the exchange bind the parties for extended periods.

Question 14

By definition,"always-a-share" customers account for a consistent percentage of the firm's total sales over time.

Question 15

Traditionally,firms have placed greater emphasis upon gaining customers than keeping them.

Question 16

Specific investments can be defined as,the dedication of assets that have sharply increased value outside a relationship.

Question 17

Friendships and/or social ties have no place in--or impact upon--business relationships.

Question 18

Once customers pay the switching costs required to change suppliers,it is very unlikely they will ever return to the original suppler.

Question 19

Lagniappe means anything given beyond strict obligation,a surprise or surplus benefit from an exchange.

Question 20

Since organizations are no more likely to change their "character" than are people,business should select their long-term "partners" very carefully.

Question 21

Lost-for-good relationships tend to be characterized by all of the following except:

A) Excellent staying power
B) Frequent communications
C) Joint planning
D) Requirement for adjustments
E) Variable performance

Question 22

Cranes Inc.gives its printing orders to multiple suppliers.These suppliers may have a share of the business in either the current period or future periods.However,one of these suppliers,Paramount Inc.,receives a considerable percent of Cranes' printing orders,though the orders taper or augment periodically.Paramount can be best classified as a(n):

A) Lost-for-good customer
B) Always-a-share customer
C) Never a share supplier
D) New supplier
E) Prospective customer

Question 23

Always-a-share sellers can move the account toward the lost-for-good type in all of the following ways,EXCEPT:

A) By seeking longrun supply contracts
B) By building interpersonal linkages
C) By fluctuating performance and business share from year to year
D) By attempting to forge technical ties
E) By meeting customer criteria for becoming a preferred supplier

Question 24

With an 80 percent chance of continuing a lost-for-good relationship each year,the probability of holding the account through the sixth year is:

A) 0.001
B) 0.2621
C) 0.0209
D) 0.1333
E) 0.80

Question 25

Which of the following observations is TRUE of always-a-share relationships?

A) Suppliers are largely interchangeable
B) Customers are tied to a system
C) They face significant switching costs
D) Customers always purchase from a single vendor
E) Relationships are cemented by switching costs

Question 26

Always-a-share customers:

A) Are tied to a system
B) Can allocate their purchases to several vendors
C) Face significant switching costs
D) Maintain a consistency in their purchase pattern
E) Involve suppliers who are not interchangeable

Question 27

Differentiating the offering on dimensions that forge structural ties and create exit barriers will tend to move the relationship toward the:

A) Lost-for-good variety
B) Always-a-share variety
C) Marginal variety
D) Average variety
E) Never a share variety

Question 28

Identify the INCORRECT statement about lost-for-good relationships.

A) They are relationships cemented by switching costs
B) These relationships motivate retention by accentuating the "dark side"
C) Consistent high performance is required to retain these accounts
D) These types of accounts do not have excellent staying power
E) Here the prospects of a customer returning to the incumbent are remote

Question 29

Successful suppliers focus upon _____ to retain new customers.

A) Contractual protections
B) Customer needs
C) Short-term profits
D) Cutting all costs of serving customers
E) Maximizing system wide costs

Question 30

Relationships cemented by switching costs are called:

A) Costly relationships
B) Lost-for-good relationships
C) Grudging relationships
D) Troubled relationships
E) Always-a-share relationships

Question 31

In case of _____,NPV can be seen as a function of retention rates,which remain at the same level in each buying period.

A) New supplier accounts
B) Always-a-share accounts
C) Lost-for-good accounts
D) Prospective customer accounts
E) Never-a-share supplier accounts

Question 32

Due to a linear relationship between retention and net present value,efforts to boost retention yield the same incremental profits at various retention levels for:

A) Always-a-share customers
B) Lost-for good customers
C) Never-a share customers
D) Marginal customers
E) Average customers

Question 33

Warehouse rackings and franchises are examples of:

A) Sensors
B) Interchangeable suppliers
C) Never-a-share customers
D) Lost-for-good customers
E) Always-a-share customers

Question 34

The foregone value of investments plus economic penalties/expenses associated with finding,evaluating and using a new supplier are called:

A) Opportunity costs
B) Distribution costs
C) Switching costs
D) Supplier costs
E) Retention costs

Question 35

In this type of account,the buyer can taper or augment purchases in increments and multiple suppliers can have a share of a customer's business in either the current period or future periods.

A) Lost-for-good customer
B) Former customer
C) Always-a-share customer
D) Never-a-share customer
E) Limited-appeal customer

Question 36

At _____,with the curvilinear relationship between retention and NPV,retention gains at the high end tend to dwarf gains obtained on the low end.

A) Always-a-share accounts
B) Lost-for good accounts
C) Never-a share accounts
D) Marginal accounts
E) Average accounts

Question 37

The challenge of "_____" will pivot on the relationship development process and emphasize the strategy of forging relational ties through role performance,social ties,technical linkages,investments and contracts.

A) Building
B) Strengthening
C) Running
D) Managing
E) Planning

Question 38

Supplier action and market evolution,such as plug compatibility and software standards have dramatically lowered exit barriers in the field of computers,moving the exchange from:

A) Lost-for-good toward always-a-share
B) New supplier toward prospective supplier
C) Always-a-share toward lost-for-good
D) Prospective supplier toward new supplier
E) Always-a-share toward prospective supplier

Question 39

_____ are usually purchased on an always-a share basis.

A) Office supplies
B) Computer systems
C) Telecommunication systems
D) Warehouse rackings
E) Franchises

Question 40

In lost-for-good accounts,

A) Customers can allocate their purchases to several vendors
B) A period of no purchases can be followed by a period of high purchases
C) Suppliers are largely interchangeable
D) Switching costs are significant
E) Customers are not tied to a system

Question 41

Assets whose value is sharply reduced outside a particular relationship are called:

A) Specific investments
B) Fixed investments
C) Variable investments
D) Fixed costs
E) Variable costs

Question 42

Customer response to service improvements indicates that the accurate form of the value equation is:

A) V = Q x P
B) V = Q² / P
C) V = Q² / P²
D) V = Q / P²
E) V = P² / Q

Question 43

"_____" a relationship involves the values,personnel and systems dedicated to maintaining a high-performance relationship.

A) Testing
B) Classifying
C) Running
D) Positioning
E) Evaluating

Question 44

Which of the following is NOT a likely example of the level at which parties interact during the evolution of business relationships?

A) Sales rep with buyer
B) Installer with user
C) Engineer with general manager
D) Customer teams with cross-functional teams
E) Director of purchasing with VP of marketing

Question 45

Identify the INCORRECT statement about quality and service.

A) Value is often described as the ratio of quality and service to price
B) Quality and service expectations are shaped by the seller
C) The impact of quality and service in building a relationship comes from delivering it consistently
D) Superior performance, quality and distinctive and reliable service are sources of competitive advantage
E) Superior quality and service help build customer loyalty

Question 46

The best business relationships are supported by:

A) Specific supplier qualification standards
B) One-way commitment(s)
C) Mutual investments/pledges
D) Low prices
E) Lack of alternatives

Question 47

On a holiday to Tahiti,Chelsea goes a hotel where she has a reservation.On her arrival,the receptionist tells her that "Sorry,but we have no record of your reservation and we are full." This instance is an example of:

A) Service quality breakdown
B) Network breakdown
C) Market penetration
D) Technical disability
E) Functional conflict

Question 48

A(n)_____ is a legally enforceable promise to perform some act in exchange for a payment or some other consideration.

A) Contract
B) Pledge
C) Agreement
D) Promise
E) Intention

Question 49

"_____" uses the themes introduced in the "building" phase to fortify and maximize the value of a strong buyer-seller relationship.

A) Testing
B) Classifying
C) Strengthening
D) Positioning
E) Evaluating

Question 50

Good service often has an "exponential" impact upon the customer's perception of:

A) Price
B) Convenience
C) Quality
D) Quantity
E) Procurement

Question 51

Identify the INCORRECT statement pertaining to modularity.

A) It refers to a system composed of indistinct subsystems or components
B) It is a factor to consider for account retention
C) The double-edged character of systems demands that firms give careful attention to the modularity of their system
D) If a module can be tested to "sample" the performance of the full system, market penetration possibilities are enhanced
E) It facilitates future upgrading

Question 52

Modularity:

A) Increases the risk of "system switching"
B) Often impairs account retention
C) Enhances future "upgrading" sales
D) Is an impediment to system adoption
E) Affects timely delivery and competence adversely

Question 53

Value is commonly defined as:

A) Low prices
B) The ratio of quality and service to price
C) High quality
D) The ratio of brand recognition to price
E) Top-drawer service

Question 54

Firms should stay in a business relationship:

A) If there are viable alternatives
B) If and only if it is cost minimizing
C) When technical features "bind" the parties
D) When they evidence diffidence
E) If there is major cost-cutting

Question 55

Long-term business relationships:

A) Mostly encounter poor service with distressing regularity
B) Emphasize only on coordination
C) Represent implicit endorsements
D) Emphasize only on communication
E) Are resented for their complexity

Question 56

Which of the following is used to reduce the "risk" of switching to a new system?

A) Modularity
B) Proximity
C) Accessibility
D) Promptness
E) Specialization

Question 57

In order for quality and service to play a major role in building/maintaining business relationships they must be:

A) Made available at extremely low prices
B) Meet expectations at least 75 percent of the time
C) Made available as soon as it is possible to spare the requisite staff
D) Consistently delivered at high levels
E) Made available only upon request

Question 58

Testing modules to "sample" the performance of the full system:

A) Affect timely delivery and competence adversely
B) Recognizes the instability of one-way commitments
C) Can be an impediment to system adoption
D) Enhances market penetration possibilities
E) Builds the buyers apprehension about being bound to a customer

Question 59

Contracts in business relationships should:

A) Emphasize severe legal threats to ensure performance
B) Take all risks out of the arrangement
C) Provide for alternatives to litigation
D) Specifically cover all possible contingencies
E) Not be legally enforceable

Question 60

This means the system is composed of distinct subsystems or components.

A) Modularity
B) Divisibility
C) Integration
D) Switching
E) Compatibility

Question 61

_____ mechanize(s)ordering and information sharing on inventories and deliveries.

A) Face-to-face communication
B) Electronic Data Interchange
C) Telephonic interchange
D) E-mails
E) Electronic lock-box

Question 62

Successful relationships usually result from all parties being willing to provide:

A) Lagniappe
B) Criticism
C) Contractual exemptions
D) Bribes
E) Grease money

Question 63

Which of the following communication channels should typically be used to negotiate production commitments?

A) Telephone
B) Fax
C) E-mail
D) Business letter
E) Face-to-face

Question 64

What are the hallmarks of a strong,continuing business relationship?

Question 65

Differentiate between always-a share relationships and lost-for-good customers.How do the exchange types put a valuable focus on the nature of customer relationships?

Question 66

Why has customer retention become one of the most critical factors in the survival/profitability of the modern firm?

Question 67

By using lagniappe,what the business agent intends to convey to the customer is:

A) "This happens all the time. It's nothing to worry about"
B) "You are important to us, not only professionally, but personally"
C) "Customer is always right"
D) "Our liability is low"
E) "We are in a mutual agreement that is legally binding"

Question 68

Accounts can be retained in the face of extreme contingencies if:

A) Every possible event is anticipated
B) The contract gives guidelines for joint action and adjustment
C) Obligations are only imposed upon one party
D) If the contract is a non-verbal one
E) It makes specific investments in people

Question 69

Lost-for-good accounts can also be described as:

A) Unprofitable accounts
B) Profitable accounts
C) Stuck-for-a-while accounts
D) Inappropriate accounts
E) Accounts-of-poor-fit

Question 70

Relationship facet performance score,obtained by calculating the average performance score for the attributes of each relationships facet can be used as independent variables in:

A) A regression analysis
B) Input analysis
C) Performance analysis
D) Product analysis
E) Output analysis

Question 71

_____ have become standard means of tracking and tuning business relationships.

A) Satisfaction surveys
B) Supragoals
C) Scholastic reviews
D) Professional forums
E) Conferences

Question 72

Which of the following generally has been the best predictor of the durability of relationships?

A) Overall interest
B) Intention to repurchase
C) Willingness to recommend
D) Likelihood of a sustained relationship
E) Proactive satisfaction

Question 73

_____ mean(s)anything given beyond strict obligation,a surprise or surplus benefit from an exchange.

A) Lagniappe
B) Sensor
C) Pay-offs
D) Bonuses
E) Non profit exchange

Question 74

Why has communication been called the "glue that holds together" a relationship?

Question 75

Managers seeking to preserve and grow existing business relationships tend to do better when they attend to:

A) Outside environmental factors
B) Legal arrangements
C) Achieving each and every short-term goal
D) Winning new customers
E) The entire value-added chain

Question 76

Generally,customer satisfaction variables are evaluated through use of:

A) Chi-square analysis
B) Regression analysis
C) Statistical summation
D) Exponential smoothing
E) Progression analysis

Question 77

By calculating an average performance score,for the attributes of different facets of the relationship,a _____ is obtained.

A) Just in-Time (JIT)
B) Relevance-in-performance (RIP)
C) Fitness-in-Time (FIT)
D) Relationship Facet Performance (RFP)
E) Totally Involved Performance (TIP)

Question 78

Write a short note on the mix of relationship ties?

Question 79

Companywide commitment to and empowerment for delivering _____ is a true manifestation of a customer retention priority.

A) Lagniappe
B) Modularity
C) Pay-offs
D) Bonuses
E) Non profit exchanges

Question 80

In _____ the buyer cannot easily switch to another supplier because personnel might have to be retrained,downstream customers would be let down or some aspect of setup would be costly.

A) Always-a-share accounts
B) Lost-for-good accounts
C) Never-a-share accounts
D) Marginal accounts
E) Average accounts