chapter 5 by kaye olivar v53

TOP 10 Learning Questions for

Chapter 5: Creating Customer Value,

Satisfaction and Loyalty

Reainki A. OlivarDec 16, 2010

Kayeolivar.blogspot.com

A. Modern Customer-Oriented Organization Chart

B. Horizontal Organization ChartC. Hierarchical Organization ChartD. Traditional Organization ChartE. Vertical Organization Chart

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1. What kind of organization chart does a manager considers when he doesn’t believe that the customer is the company’s only “true profit”?


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Organizational Charts

Traditional Organization ChartModern Customer-Oriented

Organization Chart


Modern Customer – Oriented Organizational Chart

A pyramid with the president on top, management in the middle and frontline people and customers at the bottom is already obsolete.

Successful Marketing companies invert the chart. At the top are customers; next in importance are frontline people who meet, serve, and satisfy customers; under them are the middle managers, whose job is to support the frontline people so they can serve customers well; and at the base is top management, whose job is to hire and support good middle managers. We have added customers along the sides to indicate that mangers at every level must be personally involved in knowing, meeting and serving customers.

3Kayeolivar.blogspot.com

1. What kind of organization does a manager considers when he believe that the customer is the company’s only “true profit” ?

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Answer

A. Modern Customer-Oriented Organization Chart

B. Horizontal Organization ChartC. Hierarchical Organization ChartD. Traditional Organization ChartE. Pyramid Organization Chart


2. ________ is the difference between the prospective customer’s evaluation and perceived alternatives.

A. Total Customer BenefitB. Customer-Perceived ValueC. Customer-Perceived AlternativesD. Total Customer ValueE. Total Customer Cost


Customer-Perceived Value

Customer-Perceived Value

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Total Customer Benefit

Total Customer Cost

Product Benefit Monetary Cost

Services Benefit Time Cost

Personal Benefit Energy Cost

Image Benefit Psychological Cost


Customer-Perceived Value:

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CPV is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives.


A. Total Customer BenefitB. Customer-Perceived ValueC. Customer-Perceived AlternativesD. Total Customer ValueE. Total Customer Cost

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2. ________ is the difference between the prospective customer’s evaluation and perceived alternatives.


Answer

3. Which of the following is not part of the steps in Customer Value Analysis?

A. Identifying the major attributes and benefits that customers value.

B. Assess the qualitative and insignificant attributes and features.

C. Assess the company’s and competitors’ performance on the different customer values against their rated importance.

D. Examine how customers in a specific segment rate the company’s performance against specific competitor.

E. Monitor customer values over time.


The Steps in Customer Value Analysis:

1. Identify the major attributes and benefits that customers value

- Customers are asked what attributes, benefits, and performance levels they look for in choosing a product.

2. Assess the quantitative importance of the different attributes and benefits

- Customers are asked to rate the importance of the different attributes and benefits. If their ratings diverge too much, the marketer should cluster them into different segments.


3. Assess the company’s and competitors’ performance on the different customer values against their rated importance

- Customers describe where they see the company’s and competitors’ performances on each attribute and benefit.

4. Examine how customers in a specific segment rate the company’s performance against a specific major competitor on an individual attribute or benefit basis

- If the company’s offer exceeds the competitor’s offer on all iportant atrributes and benefits, the company can charge a hihger price, or it can charge the same price and gain more market.

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5. Monitor customer values over time- The company must periodically redo its

studies of customer values and competitors’ standings as the economy, technology, and features change.

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3. Which of the following is not part of the steps in Customer Value Analysis?

A. Identifying the major attributes and benefits that customers value.

B. Assess the qualitative and insignificant attributes and features.

C. Assess the company’s and competitors’ performance on the different customer values against their rated importance.

D. Examine how customers in a specific segment rate the company’s performance against specific competitor.

E. Monitor customer values over time.


Answer

4. What is the one key to Customer Retention?

A. Good Quality ProductB. PromotionsC. Customer SatisfactionD. Customer desired E. None of the above


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Measuring Satisfaction

Mystery Shopper

Customer Loss Rate

Monitor Competitive Performance

Periodic Surveys


Monitoring Satisfaction

A company could be wise to measure customer satisfaction regularly, because one key to customer retention is customer satisfaction.

A highly satisfied customer generally stays loyal longer, buys more as the company introduces new products & upgrades existing products, talks favorably to others about the company and its products, pay less attention to competing brands and cost less to serve than new customers because transactions can become routine.


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4. What is the one key to Customer Retention?

A. Good Quality ProductB. PromotionsC. Customer SatisfactionD. Customer desired E. None of the above


Answer

5. What is best conducted with the tools of accounting techniques called activity-based costing (ABC)?

A. Customer PortfoliosB. Customer Lifetime ValueC. Customer Profitability AnalysisD. Customer Relationship ManagementE. All of the above


Customer Product Profitability Analysis

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P1 + + + Highly Profitable Product

C1 C2 C3

P2 + Profitable Product

P3 - - Losing Product

P4 + - Mixed-bag Product

High-profit Customer

Mixed-bag Customer

Losing Customer

Customers

Products


Customer Profitability Analysis

Customer Profitability Analysis (CPA) is a useful type of profitability analysis.

Customers are arrayed along the columns & products along the rows. Each cell contains a symbol representing the profitability of selling that product to that customer. Customer 1 is very profitable; he buys two profitable products (P1 & P2). Customer 2 yields a picture of mixed profitability; he buys one profitable product (P1) and one unprofitable product (P3). Customer 3 is a losing customer because he buys one profitable product (P1) and two unprofitable products (P3 & P4).


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5. What is best conducted with the tools of accounting techniques called activity-bases costing (ABC)?

A. Customer PortfoliosB. Customer Lifetime ValueC. Customer Profitability AnalysisD. Customer Relationship ManagementE. All of the above


Answer

6. What is the process of carefully managing detailed information about individual customers and all customer “touch points” to maximize customer loyalty?

A. Customer Touch PointB. Customer Satisfaction IndicatorC. Customer Relationship ManagementD. Customer Process DevelopmentE. Customer Retention


Framework of CRM

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Identify prospects & customers

Differentiate customers by needs & value to company

Interact to improve knowledge

Customize for each customer


CRM Strategies

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Enhance “share of wallet”

Increase longevity

Terminate low-profit customers

Reduce the rate of defection

Focus more effort on high-profit customers


Customer Relatonship Management (CRM)

Customer Relationship Management enables companies to provide excellent real-time customer service through the effective use of individual account information. Based on what they know about each valued customer, companies can customize market offerings, services, programs, messages and media.

CRM is important because a major driver of company profitability is the aggregate value of the company’s customer base.


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6. What is the process of carefully managing detailed information about individual customers and all customer “touch points” to maximize customer loyalty?

A. Customer Touch PointB. Customer Satisfaction IndicatorC. Customer Relationship ManagementD. Customer Process DevelopmentE. Customer Retention


Answer

7. ________describes the net present value of the stream future profits expected over the customer’s lifetime purchases.

A. Customer Value FormulaB. Customer Quantitative FrameworkC. Customer Lifetime ValueD. Clients Suitability testE. Customers Survey Analysis


Calculating Customer Lifetime Value

CLV =

Where, pt = price paid by a customer at time t,

Ct = direct cost of servicing the customer at time t,I = discount rate or cost of capital for the firm,rt = probability of customer repeat buying or being “alive” at time t,AC = acquisition cost,T = time horizon for estimating CLV

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(1 + i)t


(pt – ct)rt

AC

Calculating CLV

CLV calculations provide a formal quantitative framework for planning customer investment and help marketers adopt a long-term perspective. One challenge in applying CLV concepts, however, is to arrive at reliable cost and estimates.

Marketers who use CLV concepts must also take into account the short-term, brand-building marketing activities that help increase customer loyalty.


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7. ________describes the net present value of the stream future profits expected over the customer’s lifetime purchases.

A. Customer Value FormulaB. Customer Quantitative FrameworkC. Customer Lifetime ValueD. Clients Suitability testE. Customers Survey Analysis


Answer

8. Which of the following statements is TRUE?

To reduce the defection rate, the company must:

A. Define and measure its retention rateB. Distinguish the causes of customer attrition and identify

those that can be managed better.C. Compare the lost profit equal to the customer’s lifetime

value from a lost customer to costs to reduce the defection rate.

D. None of the aboveE. All of the above


REDUCING DEFECTION

It is not enough to attract new customers; the company must keep them and increase their business. Too many companies suffer from high customer churn or defection.

To reduce defection rate, the company must: Define and measure its retention rate. For a

magazine, subscription renewal rate is a good measure of retention. For a college, it could be the first-to-second year retention rate or the class graduation rate.


REDUCING DEFECTION

Distinguish the causes of customer attrition and identify those that can be managed better. Not much can be done about customers who leave the region or go out of business, but much can be done about those who leave because of poor service, shoddy products, or high prices.

Compare the lost profit equal to customer’s lifetime value from a lost customer to the costs to reduce the defection rate. As long as the cost to discourage defection is lower than the lost profit, the company should spend the money to try to retain the customer.


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8. Which of the following statements is TRUE?

To reduce the defection rate, the company must:

A. Define and measure its retention rateB. Distinguish the causes of customer attrition and identify

those that can be managed better.C. Compare the lost profit equal to the customer’s lifetime

value from a lost customer to costs to reduce the defection rate.

D. None of the aboveE. All of the above


Answer

9. Which of the following is not part in the process of attracting & retaining customers?

A. PotentialsB. First-time CustomersC. MembersD. Customer RelationE. Advocates


The Customer-Development Process

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Suspects

Prospects Disqualified

Ex-Customers

RepeatCustomers

Partners

MembersClientsFirst-timeCustomers


Retention Dynamics

The starting point is everyone who might conceivably buy the product or service. These potentials are people or organizations who might conceivably have an interest in buying the company’s product or service, but may not have the means or intention buy. The next task is to identify which potentials are good prospects.Marketing efforts can then convert the prospects into first-time customers and then into repeat customers and then into clients. The next challenge is to turn clients into members and turning them into advocates, customers who enthusiastically recommend the company and its products to others and the ultimate challenge is to turn advocates to partners.


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9. Which of the following is not part in the process of attracting & retaining customers?

A. PotentialsB. First-time CustomersC. MembersD. Customer RelationE. Advocates


Answer

10. These are the different ways in using database except.

A. To decide which customers should receive a particular offer

B. To remove insignificant customers C. To reactivate customer purchasesD. To avoid serious customer mistakesE. To deepen customer loyalty


Using the DATABASE

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To deepen loyalty

To target offers

To reactivate customers

To identify prospects

To avoid mistakes


Five Ways of Using Databases:

1. To identify prospects – Many companies generate sales leads by advertising their product or services. The ads generally contain a response feature, such as a business reply card or toll-fee phone number, and the company builds its database from customer responses. It sorts through the database to identify the best prospects, then contacts them by mail, phone or personal call to try to convert them into customers.

2. To decide which customers should receive a particular offer – Companies are interested in selling, up-selling and cross-selling their products and services.


Companies set up criteria describing the ideal target customer for a particular offer. Then they search their customer databases for those who most closely resemble the ideal type.

3. To deepen customer loyalty – Companies can build interest and enthusiasm by remembering customer preferences and by sending appropriate gifts, discount coupons and interesting reading material.

4. To reactivate customer purchases – Companies can install automatic mailing programs that send out birthday or anniversary card. The database can help company make attractive or timely offers.

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5. To avoid serious customer mistakes – A major bank confessed to a number of mistakes made by not using its customer database well. In one case, a bank gave a premium customer only standard service in another country.

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10. These are the different ways in using database except.

A. To decide which customers should receive a particular offer

B. To remove insignificant customers C. To reactivate customer purchasesD. To avoid serious customer mistakesE. To deepen customer loyalty


Answer

TOP 10 Learning Questions for

Chapter 5: Creating Customer Value,

Satisfaction and Loyalty

Reainki A. OlivarDec 16, 2010


chapter 5 by kaye olivar v53

Business

customer value analysis

customers value customers

different customer values

monitor customer values

studies of customer

benefits customers

kind of organization

rated importance customers