Question 1

Duration of the relationship is a critical parameter for calculating customer lifetime value.

Accepted Answer

A) True 
 B)False  True

Question 2

Describe the characteristics of high cost-to-serve customers and low cost-to-serve customers.

Accepted Answer

Examples of differences between customers who have high and low costs-to-serve may be drawn from the chapter's Exhibit 6-1, part of which appears below.

Question 3

The pricing waterfall charts revenue leaks from list price caused by discounts and allowances used to gain customer loyalty.

Accepted Answer

A) True 
 B)False  True

Question 4

Staley company has 30 order operators with associated costs of $1,000,000 per year.Staley calculated that each operator worked about 2,000 hours per year.Allowing for time off,each operator provided about 1,600 or productive work per year.What is the rate per hour for each order entry employee?

Accepted Answer

A)  $20.83
B)  $28.83
C)  $500.00
D)  $625.00

Question 5

Jackie Company's CFO provided the following information on last year's sales for two customers that purchased a variety of products from the company.
  
a. Which customer is more profitable for the company?
b. Compare a sales incentive scheme that pays 3% of sales revenue to an incentive scheme that pays 5% of customer profit.How will each scheme affect salespersons' desire to increase sales to each customer?

Accepted Answer

The answer of Jackie Company's CFO provided the following information...

Question 6

Companies generally use two approaches to customer satisfaction surveys: telephone interviews and personal interviews.

Accepted Answer

A) True 
 B)False

Question 7

The pricing waterfall:

Accepted Answer

A)  charts the multiple sources of revenue by customer.
B)  charts multiple list prices offered to different customers.
C)  charts the multiple revenue leaks from list price caused by allowances and discounts.
D)  charts multiple types of customer costs.

Question 8

In a service company,marketing and selling costs are customer independent.

Accepted Answer

A) True 
 B)False

Question 9

A bank customer with a high checking account balance and few transactions is a high cost-to-serve customer.

Accepted Answer

A) True 
 B)False

Question 10

Bealing Company has the following operating profit:
  
a. Bealing could increase revenues by 10% by reducing sales discounts by 10%.There will be no changes in variable or fixed costs.What would be the percentage increase in operating profits?
b. Refer to the original information in this problem.Suppose Bealing's sales people discounted sales another 2% with no change in variable or fixed costs.What is the change in operating profits?

Accepted Answer

The answer of Bealing Company has the following operating profit:
...

Question 11

Compare and contrast a typical salesperson's revenue based compensation plan to a compensation plan based on customer profits.

Accepted Answer

The answer of Compare and contrast a typical salesperson's revenue...

Question 12

Which of the following is NOT an option to transform breakeven or loss customers into profitable ones?

Accepted Answer

A)  Improve the process used to produce, sell, deliver and service the customer.
B)  Use less menu-based pricing that allows customers to select features and services it wishes to pay for.
C)  Improve margins by lowering costs.
D)  Use more discipline in granting discounts and allowances.

Question 13

Companies can use time-driven ABC costing systems to create customer-specific profit and loss statements.

Accepted Answer

A) True 
 B)False

Question 14

Examining internal operations to see where the company can improve processes to lower costs of serving customers is an example of:

Accepted Answer

A)  process improvements.
B)  activity based pricing.
C)  managing relationships.
D)  the pricing waterfall.

Question 15

Many companies trace marketing,sales,distribution,and administration costs to customers to accurately measure customer profitability.

Accepted Answer

A) True 
 B)False

Question 16

What is the customer lifetime value of customer Emma Stone for the first three years of the customer relationship?

Accepted Answer

A)  $2,080.00
B)  $940.49
C)  $1,380.00
D)  $240.49

Question 17

Discuss the 80-20 rule and the 40-1 rule.

Accepted Answer

The answer of Discuss the 80-20 rule and the 40-1...

Question 18

Measuring customer profitability can be accomplished through an activity based costing study.

Accepted Answer

A) True 
 B)False

Question 19

Low cost-to-serve customers order in smaller quantities.

Accepted Answer

A) True 
 B)False

Question 20

Salespersons' incentives that set minimum quotas and commissions based on sales revenue,and tie bonuses and rewards to achieving sales revenues above a stretch target contribute to unprofitable customer relationships.

Accepted Answer

A) True 
 B)False

Exam 6: Measuring and Managing Customer Relationships

Duration of the relationship is a critical parameter for calculating customer lifetime value.

Describe the characteristics of high cost-to-serve customers and low cost-to-serve customers.

The pricing waterfall charts revenue leaks from list price caused by discounts and allowances used to gain customer loyalty.

Staley company has 30 order operators with associated costs of $1,000,000 per year.Staley calculated that each operator worked about 2,000 hours per year.Allowing for time off,each operator provided about 1,600 or productive work per year.What is the rate per hour for each order entry employee?

Companies generally use two approaches to customer satisfaction surveys: telephone interviews and personal interviews.

The pricing waterfall:

In a service company,marketing and selling costs are customer independent.

A bank customer with a high checking account balance and few transactions is a high cost-to-serve customer.

Compare and contrast a typical salesperson's revenue based compensation plan to a compensation plan based on customer profits.

Which of the following is NOT an option to transform breakeven or loss customers into profitable ones?

Companies can use time-driven ABC costing systems to create customer-specific profit and loss statements.

Examining internal operations to see where the company can improve processes to lower costs of serving customers is an example of:

Many companies trace marketing,sales,distribution,and administration costs to customers to accurately measure customer profitability.

What is the customer lifetime value of customer Emma Stone for the first three years of the customer relationship?

Discuss the 80-20 rule and the 40-1 rule.

Measuring customer profitability can be accomplished through an activity based costing study.

Low cost-to-serve customers order in smaller quantities.

Salespersons' incentives that set minimum quotas and commissions based on sales revenue,and tie bonuses and rewards to achieving sales revenues above a stretch target contribute to unprofitable customer relationships.