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TOP 10 Learning Questions for
Chapter 5Creating Customer Value, Satisfaction, and Loyalty
Martha BallesterosDecember 2010
http://martha-ballesteros.blogspot.com/
1. Which of the following is not a profit tier?
A. Gold CustomersB. Silver CustomersC. Iron CustomersD. Lead Customers
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Customer - Product Profitability Analysis
C1 C2 C3
P1 + + + Highly profitable product
P2 + Profitable product
P3 - - Losing Product
P4 - Mixed-bag product
High-profit customer
Mixed-bag customer
Losing customer
3
Customers
Products
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Profit tiers classify customers into those worth pursuing and those that should receive less attention
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Platinum customers – most profitable
Gold customers – profitable
Iron customers – low profitability but desirable for volume
Lead customers – unprofitable and undesirable
1. Which of the following is not a profit tier?
A. Gold CustomersB. Silver CustomersC. Iron CustomersD. Lead Customers
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2. _______ is the difference between the prospective customer’s evaluation of all benefits and all costs of an offering and the perceived alternatives
A. Customer-Perceived ValueB. Value PropositionC. Value Delivery SystemD. Customer Lifetime Value
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Determinants of Customer – Perceived Value
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Total Customer Cost
ProductBenefit
Total Customer Benefit
Customer-PerceivedValue
ServicesBenefit
PersonnelBenefit
ImageBenefit
MonetaryCost
Time Cost
Energy Cost
PsychologicalCost
Customer – Perceived Value
Total Customer Benefit – perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering
Total Customer Cost – perceived bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of the given market offering
8
Total Customer Benefit – Total Customer Cost = Customer-Perceived Value
http://martha-ballesteros.blogspot.com/
2. _______ is the difference between the prospective customer’s evaluation of all benefits and all costs of an offering and the perceived alternatives
A. Customer-Perceived ValueB. Value PropositionC. Value Delivery SystemD. Customer Lifetime Value
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3. Which of the following statements about customer satisfaction is not true?
A. One key to customer retention is customer satisfaction
B. Customer satisfaction and customer loyalty are proportional
C. Greater customer satisfaction is linked to lower risk in the stock market
D. Generally, a highly satisfied customer is less sensitive to price
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Customer Satisfaction
In general, satisfaction is a person’s feelings of
pleasure or disappointment that result from
comparing a product’s perceived performance
or outcome to their expectations
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Monitoring Satisfaction
One key to customer retention is customer satisfaction
Customer satisfaction and customer loyalty are not proportional
Higher returns and lower risk in the stock market In general, a highly satisfied customer:
Stays loyal longer Buys more as the company introduces new products and
upgrades existing products Talks favorably to others about the company Pays less attention to the competition Less sensitive to price Less costly to serve because of routine transactions
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3. Which of the following statements about customer satisfaction is not TRUE?
A. One key to customer retention is customer satisfaction
B. Customer satisfaction and customer loyalty are proportional
C. Greater customer satisfaction is linked to lower risk in the stock market
D. Generally, a highly satisfied customer is less sensitive to price
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4. Which of the following is not part of the customer development process?
A. ProspectsB. PatronsC. PotentialsD. Partners
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The Customer Development Process
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Inactive or Ex-customers
Potentials
Prospects
First-timeCustomers
Disqualified
RepeatCustomers
Clients Members Partners
The Customer Development Process
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Inactive or Ex-customers
Potentials
Prospects
First-timeCustomers
Disqualified
RepeatCustomers
Clients Members Partners
The Customer Development Process
Potentials – people or organizations who might have an interest in buying the company’s product or service
Prospects – people with motivation, ability, and opportunity to make a purchase
Partners – people who enthusiastically recommend and actively work with the company
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4. Which of the following is not part of the customer development process?
A. ProspectsB. PatronsC. PotentialsD. Partners
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5. Pizza Hut’s 30-minute delivery guarantee – “If it’s late, it’s free!” - creates what value for the customer?
A. Customer LoyaltyB. Customer SatisfactionC. Customer RetentionD. Product and Service Quality
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Creating Customer Value, Satisfaction, and Loyalty
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Customer Loyalty- commitment to repurchase or repatronize a preferred product or servicein the future despite situational influences and marketing efforts of competitors
Customer Satisfaction- customers’ feelings of pleasure or disappointment that result from comparinga product’s perceived performance or outcome to their expectations
Customer Retention- exceeding customers’ expectations to become loyal advocates of the productor service
Product and Service Quality- totality of features and characteristics of a product or service that bear on itsability to satisfy stated or implied needs
Creating Customer Value, Satisfaction, and Loyalty
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Customer Loyalty- commitment to repurchase or repatronize a preferred product or servicein the future despite situational influences and marketing efforts of competitors
Customer Satisfaction- customers’ feelings of pleasure or disappointment that result from comparinga product’s perceived performance or outcome to their expectations
Customer Retention- exceeding customers’ expectations to become loyal advocates of the productor service
Product and Service Quality- totality of features and characteristics of a product or service that bear on itsability to satisfy stated or implied needs
Customer Satisfaction
In the event that Pizza Hut fails to meet its
guaranteed 30-minute delivery time, to compensate for the disappointment from
the customer and ensure customer
satisfaction, they are willing to give the ordered
product for free 22
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5. Pizza Hut’s 30-minute delivery guarantee – “If it’s late, it’s free!” - creates what value for the customer?
A. Customer LoyaltyB. Customer SatisfactionC. Customer RetentionD. Product and Service Quality
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6. Which of the following statements is not true?
A. Product and service quality, customer satisfaction, and company profitability are intimately connected
B. The company’s largest customers always yield the most profit
C. The midsize customers who receive good service and pay nearly full price are often the most profitable
D. The customer profit rate increases over the life of a retained customer
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Customer Profitability
A profitable customer is a person, household, or
company that over time yields a revenue stream that exceeds by an acceptable
amount the company’s cost stream for attracting, selling, and servicing that customer.
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The 150-20 Rule
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Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
The 150-20 Rule
The 20% most profitable customers generate
as much as 150% of the profits of a company;
the 20% least profitable lose 100% of the profits.
It’s not always the company’s largest customers who yield the most profit.
The largest customers can demand considerable service and receive the deepest discounts 27
http://martha-ballesteros.blogspot.com/
6. Which of the following statements is not true?
A. Product and service quality, customer satisfaction, and company profitability are intimately connected
B. The company’s largest customers always yield the most profit
C. The midsize customers who receive good service and pay nearly full price are often the most profitable
D. The customer profit rate increases over the life of a retained customer
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7. What customer value improvement strategy involves businesses giving special treatment to their valuable customers through birthday greetings, small gifts, and invitations to special sports or art events?
A. Reducing the rate of customer defection
B. Increasing the longevity of the customer relationship
C. Enhancing the growth potential of each customer through “share-of-wallet”, cross-selling, and up-selling
D. Focusing disproportionate effort on high-value customers
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Increasing Value of the Customer Base
30
Reducing the rate of customer defection- selecting and training employees to be knowledgeable and friendly
Increasing the longevity of the customer relationship- the more involved a customer is with the company, the more likely he is to stick around
Enhancing the growth potential of each customer through “share-of-wallet”, cross-selling, and up-selling- increase sales from existing customers with new offerings and opportunities
Making low-profit customers more profitable or terminating them- to avoid direct termination, marketers can encourage unprofitable customers to buy more or in large quantities
Focusing disproportionate effort on high-value customers- most valuable customers are treated in a special ways- thoughful gestures can send a strong positive signal to the customer
http://martha-ballesteros.blogspot.com/
Increasing Value of the Customer Base
31
Reducing the rate of customer defection- selecting and training employees to be knowledgeable and friendly
Increasing the longevity of the customer relationship- the more involved a customer is with the company, the more likely he is to stick around
Enhancing the growth potential of each customer through “share-of-wallet”, cross-selling, and up-selling- increase sales from existing customers with new offerings and opportunities
Making low-profit customers more profitable or terminating them- to avoid direct termination, marketers can encourage unprofitable customers to buy more or in large quantities
Focusing disproportionate effort on high-value customers- most valuable customers are treated in a special ways- thoughful gestures can send a strong positive signal to the customer
http://martha-ballesteros.blogspot.com/
7. What customer value improvement strategy involves businesses giving special treatment to their valuable customers through birthday greetings, small gifts, and invitations to special sports or art events?
A. Reducing the rate of customer defection
B. Increasing the longevity of the customer relationship
C. Enhancing the growth potential of each customer through “share-of-wallet”, cross-selling, and up-selling
D. Focusing disproportionate effort on high-value customers
32http://martha-ballesteros.blogspot.com/
8. A ________ is where marketers can capture, query, and analyze data to draw inferences about individual customer’s needs and responses
A. Customer DatabaseB. Customer Mailing ListC. Business DatabaseD. Data Warehouse
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Customer Databases and Database Marketing
34
Customer Database- organized collection of comprehensive information about individual customersor prospects that is current, accessible, and actionable for marketing purposes
Customer Mailing List- a set of names, addresses, and telephone numbers
Business Database- business customers’ past purchases; past volumes, prices, and profits; competitive strengths and weaknesses, and other relevant patterns and policies
Data Warehouse- where marketers can capture, query, analyze data to draw inferences aboutindividual customer’s needs and responses
http://martha-ballesteros.blogspot.com/
Customer Databases and Database Marketing
35
Customer Database- organized collection of comprehensive information about individual customersor prospects that is current, accessible, and actionable for marketing purposes
Customer Mailing List- a set of names, addresses, and telephone numbers
Business Database- business customers’ past purchases; past volumes, prices, and profits; competitive strengths and weaknesses, and other relevant patterns and policies
Data Warehouse- where marketers can capture, query, analyze data to draw inferences aboutindividual customer’s needs and responses
http://martha-ballesteros.blogspot.com/
8. A ________ is where marketers can capture, query, and analyze data to draw inferences about individual customer’s needs and responses
A. Customer DatabaseB. Customer Mailing ListC. Business DatabaseD. Data Warehouse
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9. Which of the following is not true about building customer loyalty?
A. Listening to customers is crucial to customer relationship management
B. Personalization goes beyond creating customized information
C. Monitor customer values over timeD. Supply customers with special
equipment or links to help them manage orders, payroll, and inventory
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Customer Loyalty
The commitment to repurchase or repatronize
a preferred product or service in the future
despite situational influences and marketing
efforts of competitors
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Four Types of Marketing Activities to Improve Loyalty and Retention
Interacting with Customers Being a customer advocate by listening to customers and
understanding their point of view
Developing Loyalty Programs Helps build long-term loyalty with high customer lifetime
value (CLV), creating cross-selling opportunities in the process
Personalizing Marketing Create strong bonds with customers by individualizing and
personalizing relationships
Creating Institutional Ties Customers are less inclined to switch to another supplier
when this would involve high capital costs or the loss of loyalty discounts
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Building Customer Loyalty
A. Listening to customers is crucial to customer relationship management Interacting with Customers
B. Personalization goes beyond creating customized information Personalized Marketing
C. Monitor customer values over timeD. Supply customers with special equipment or
links to help them manage orders, payroll, and inventory Creating Institutional Ties
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One of thesteps incustomer valueanalysis. Not a loyalty and retentionmarketing activity.
9. Which of the following is not true about building customer loyalty?
A. Listening to customers is crucial to customer relationship management
B. Personalization goes beyond creating customized information
C. Monitor customer values over timeD. Supply customers with special
equipment or links to help them manage orders, payroll, and inventory
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10. PLDT keeps a database of their customers. The company makes sure that the customers get updated with their bill, the latest promos and services, as well as recommend product and service upgrades. The company utilizes their database in such ways except,
A. To identify prospectsB. To decide which customers should
receive a particular offerC. To improve customer satisfactionD. To reactivate customer purchases
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Using the Database
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To identify prospects- companies sort through a database to identify best prospects and contactsthem by mail, phone, or personal call to try convert them into customers
To decide which customers should receive a particular offer- databases help companies match ideal target customer based on a criteriafor a particular offer
To deepen customer loyalty- build interest and enthusiasm by remembering customer preferences
To reactivate customer purchases- help the company make attractive or timely offers
To avoid serious customer mistakes- updated database of customer inquiries and transactions helps companiesavoid mistakes
Using the Database
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To identify prospects- companies sort through a database to identify best prospects and contactsthem by mail, phone, or personal call to try convert them into customers
To decide which customers should receive a particular offer- databases help companies match ideal target customer based on a criteriafor a particular offer
To deepen customer loyalty- build interest and enthusiasm by remembering customer preferences
To reactivate customer purchases- help the company make attractive or timely offers
To avoid serious customer mistakes- updated database of customer inquiries and transactions helps companiesavoid mistakes
PLDT Customer Satisfaction vs. Customer Loyalty
PLDT also ensures customer satisfaction through their 24-
hour customer service assistance and immediate response
team,among many others.
However, for this concept, PLDT tries to deepen customer
loyalty by sending discount coupons and giving reward
points to long-standing and valued customers as indicated in
their customer database. 45http://martha-ballesteros.blogspot.com/
10. PLDT keeps a database of their customers. The company makes sure that the customers get updated with their bill, the latest promos and services, as well as recommend product and service upgrades. The company utilizes their database in such ways except,
A. To identify prospectsB. To decide which customers should
receive a particular offerC. To improve customer satisfactionD. To reactivate customer purchases
46http://martha-ballesteros.blogspot.com/
TOP 10 Learning Questions for
Chapter 5Creating Customer Value, Satisfaction, and Loyalty
Martha BallesterosDecember 2010
http://martha-ballesteros.blogspot.com/
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