Deck 11: Optimizing Around the Customer: Measuring the Success of Customer-Based Initiatives and the Customer-Centric Organization

Question 1

Customers create long-term value because they have __________ .

A) money
B) memories
C) needs
D) values

Answer 1

memories

Question 2

The actual economic value of any business enterprise can measured in terms of:

A) the discounted net present value of the future stream of cash flow
B) the future value of the net present cash flow
C) the discounted net present value of average past earnings
D) the future value of past net cash flow

Answer 2

the discounted net present value of the future stream of cash flow

Question 3

Creating maximum customer value requires:

A) prioritizing long-term value over short-term value
B) prioritizing short-term value over long-term value
C) balancing short-term value with long-term value
D) focusing on long-term value to the exclusion of short-term value

Answer 3

balancing short-term value with long-term value

Question 4

Traditional measures of financial success emphasize:

A) prioritizing long-term value over short-term value
B) prioritizing short-term value over long-term value
C) balancing short-term value with long-term value
D) focusing on long-term value to the exclusion of short-term value

Question 5

Legacy metrics include all of the following except:

A) quarterly product sales
B) number of new customers acquired
C) Return on Customer
D) return on investment

Question 6

Illustrating the importance of the customer as financial asset, Amazon's Jeff Bezos has said that he prioritizes spending on all of the following except:

A) advertising
B) free shipping
C) lower prices
D) service enhancement

Question 7

Which of the following reasons help explain why companies tend to focus on short-term performance?

A) the investment community's obsession with short-term performance
B) companies feel powerless to change
C) customers' obsession with short-term performance
D) a and b
E) a and c

Question 8

Customer equity includes the LTV of:

A) past and present customers
B) present and future customers
C) present customers only
D) past, present, and future customers

Question 9

Gupta and Lehmann's customer equity study showed that customer equity was measurably impacted most by:

A) reducing the cost of new customer acquisition
B) increasing customer retention rates
C) raising product margins
D) increasing stock prices

Question 10

Losing a customer's business due to circumstances beyond a company's control is referred to as:

A) customer attrition
B) customer defection
C) customer retention
D) "firing" an unprofitable customer

Question 11

All of the following are factors in defining customer equity except:

A) acquiring more customers
B) acquiring more valuable customers
C) reducing customer attrition
D) increasing service costs per customer

Question 12

The metric that measures how well an enterprise is using customers to create short-term and long-term value is:

A) return on investment
B) Return on Customer
C) return on equity
D) total shareholder return

Question 13

Value harvesters are companies whose:

A) customer value rate is below their cost of capital
B) customer value rate is above their cost of capital
C) customer value rate is equal to their cost of capital
D) customer value rate is below zero

Question 14

Predictive modeling includes all of the following steps except:

A) devising an equation for LTV that includes data on measurable behaviors
B) identifying the most predictive variables currently available
C) generating a second equation to predict an individual customer's LTV
D) using transactional data to calculate LTV retrospectively

Question 15

All of the following represent lifestyle changes relevant to predicting LTV change except:

A) A customer signs up for an e-mail newsletter.
B) A privately held business goes public.
C) A customer earns an advanced degree.
D) A customer's health status changes.

Question 16

Define "customer equity" and explain why this concept is crucial to a company's profitability. What does it include? How is it measured? What are the obstacles to measuring it accurately?

Question 17

Explain fully why ROC = TSR.

Question 18

Explain the difference between value creators, value harvesters, and value destroyers. What values and behaviors characterize companies in each category?

Question 19

How would a company calculate its ROC? (Include relevant equations as well as a description of the process.) How might the results be used in daily decision making?

Question 20

List the four leading indicators for predicting LTV change and provide examples of each. Include both B2B and B2C examples.