Deck 16: The Financial and Economic Impact of Service

Question 1

_____ marketing is used by companies to prevent customer defection.

A) Vertical integration
B) Guerilla
C) Defensive
D) Flank-movement
E) Offensive

Answer 1

C

Question 2

Which of the following is NOT likely to occur when a company uses an offensive marketing effect?

A) Higher market share
B) Increased price premium
C) Customer churn
D) Customer acquisition
E) Improved word-of-mouth communication

Answer 2

C

Question 3

The _______________ states that the rank that consumers assign to a service relative to the others in the category predicts share of wallet.

A) Share of customer formula
B) Budget allocation rule
C) Market allocation rule
D) Wallet allocation rule
E) Share of spending formula

Answer 3

D

Question 4

Which of the following is NOT likely to be a source of money when a company uses a defensive marketing effect?

A) Increased market share
B) Increased volume of purchases
C) Lower costs
D) Increased word-of-mouth communication
E) Increased price premium

Question 5

_______________ is the percentage of a customer's spending within a category that is captured by a given service.

A) Share of spending
B) Share of market
C) Share of customer
D) Share of wallet
E) Share of budget

Question 6

The correlation between a brand's wallet allocation rule and its financial results is ________ than the relationship between previous service and financial measures.

A) Far lower
B) Somewhat lower
C) Not much different
D) Somewhat higher
E) Far higher

Question 7

In the early 1990s when the US.General Accounting Office (GAO)studied the financial effect of service quality on companies that had won the Malcolm Baldrige National Quality Award,it determined that these elite quality firms benefited in all of the following ways EXCEPT:

A) Increased market share
B) Improved return on sales
C) Improved sales per employees
D) Increased return on assets
E) Increased advertising

Question 8

A review of two decades of studies examining the links among customer satisfaction,service quality and firm performance concluded that improvements in customer satisfaction have _________ impact on firms' financial performance.

A) A significant and positive
B) Absolutely no
C) A small negative
D) An undetermined
E) A large negative

Question 9

Which of the following has the strongest effect on a service provider's profits?

A) Market share
B) Unit costs
C) Location
D) Employee salaries
E) Customer defection

Question 10

Offensive marketing effects involve market share,reputation and:

A) Word-of-mouth communication
B) Vertical integration
C) Price premiums
D) High purchase volumes
E) Geodemographic segmentation

Question 11

When calculating share of wallet,a brand's ___________ is the relative position that a customer assigns to the brand in comparison to other brands also used by the customer in the category.

A) Rank
B) Return
C) Spending allocation
D) Revenue
E) Spending rule

Question 12

The increased profits a service firm realizes from customer retention result from all of the following EXCEPT:

A) Lower costs
B) Increased volume of purchases
C) The ability to charge a price premium
D) Customer defection
E) Increased word-of-mouth communication

Question 13

All of the following are strategic issues that the wallet allocation rule addresses EXCEPT:

A) Managers cannot evaluate their firms without taking competition into account.
B) The rank that consumers assign to a service relative to the others in the same category matters.
C) Parity among brands the customer uses is unfavorable
D) The more brands a customer uses,the lower the potential for everyone.
E) All of the above are strategic issues that the wallet allocation rule addresses.

Question 14

Service quality can help companies attract more and better customers to the business through _____ marketing.

A) Insurgent
B) Offensive
C) Flank-movement
D) Defensive
E) Guerilla

Question 15

The benefits of offensive marketing have been documented through the use of:

A) PIMS (profit impact of marketing strategy)
B) Multiple regression analysis
C) Return on investment (ROI)analysis
D) Financial ratios
E) All of the above

Question 16

PIMS (profit impact of marketing strategy)research:

A) Is used for determining the short-term effect of service quality on company profits
B) Shows that companies offering superior service achieve the same market share growth as those who offer average service
C) Demonstrates the advantages of offensive marketing
D) Relies on executives' opinions to predict how services will affect profit
E) Is accurately described by all of the above

Question 17

The wallet allocation rule takes into account both _________ and the number of brands in the set the consumer uses.

A) Size
B) Rank
C) Revenue
D) Spending
E) None of the above.

Question 18

The owner of Fiori Flower and Gift Shop has noticed a gradual decline in its number of customers over the last three years.The owner suspects that it is experiencing _____ due to the recent opening of a Kroger supermarket in the community.

A) Customer defection
B) Customer empowerment
C) An ethical dilemma
D) Customer autonomizing
E) Customerization

Question 19

The owner of Fiori Flower and Gift Shop has noticed a gradual decline in its number of customers over the last three years.The owner suspects that many of its regular customers are now buying flowers at the newly opened Kroger supermarket.It would be appropriate for the owner to institute _____ marketing.

A) Guerrilla
B) Flanking-movement
C) Vertical integration
D) Defensive
E) Offensive

Question 20

There are several auto repair shops in a three-block area on King Street.One of the shop owners decided to extend her shop's operating hours until 10 p.m.Monday-Thursday and provide a pick-up and delivery service with bonded drivers as well as guarantee all repairs for six months.This job owner is engaged in _____ marketing.

A) Defensive
B) Churn
C) Guerilla
D) Flank-movement
E) Offensive

Question 21

The research on top box scores conducted across 10 studies by TARP Worldwide found what percent of customers who report being very satisfied (i.e.,checked the top box)say they will definitely repurchase?

A) 96 percent
B) 90 percent
C) 78 percent
D) 64 percent
E) 50 percent

Question 22

Toyota found that intent to purchase a Toyota automobile increased from 37 percent to _____ percent with a positive service experience.

A) 93
B) 89
C) 82
D) 79
E) 65

Question 23

Which of the following statements about customer perceptions of service and consumer purchase intentions is true?

A) There is no relationship between customer perceptions of service and any consumer intentions
B) While there is no relationship between customer perceptions of service and purchase intentions,there is a strong relationship between perceptions of superior service and increased word-of-mouth communications
C) Researchers suspect there is little relationship between a customer perception of service and his or her intent to buy
D) Customer perceptions of service affect consumer intentions in several positive ways-including the purchase intention
E) Customer expectations - not perceptions - affect consumer behavioral intentions

Question 24

Which of the following statements about providing customers with service quality is true?

A) All customers must be provided the same superior quality of service
B) All customers are worth attracting and keeping through the use of service quality
C) The same services marketing strategy should be used with all customers
D) All customers will be profitable in the long run; therefore,each is deserving of quality service
E) Links exist among customer satisfaction,service quality and increased purchases

Question 25

Many companies that have adopted a customer retention strategy are now using the extent of _________ as their main measure of customer loyalty.

A) Word-of-mouth
B) Personalized direct mail
C) Network television advertising
D) Publicity
E) Advertising in prestige magazines

Question 26

A Marriott hotel is able to charge four times as much as an Econo-Lodge for a room because of the amenities the Marriott offers.These amenities include a swimming pool,room service,exercise equipment,in-room iron,hair dryer and coffee maker and more.The Econo-Lodge provides guests with a clean room to sleep in and little else.Marriott's ability to charge a premium price is the result of its _____ strategy.

A) Defensive
B) Price skimming
C) Neutral
D) Guerrilla
E) Flanking

Question 27

Toyota found that intent to purchase a Toyota automobile increased from 37 percent to _____ percent with both positive sales and service experiences.

A) 97
B) 91
C) 80
D) 75
E) 68

Question 28

The customer equity model illustrates how:

A) Customer equity is influenced by value equity,brand equity and relationship equity
B) Interactive marketing,external marketing and internal marketing are interrelated
C) To identify unexpected service encounters
D) Customer equity leads to more efficient defensive marketing
E) Organizations can more effectively monitor customer churn

Question 29

Many companies do not identify and act on the correct non-financial measures.One mistake the companies make is _______ that involves not laying out the cause-and-effect relationships between drivers and strategic success.

A) Not linking measures to strategy
B) Not validating the links
C) Not setting the right performance targets
D) Measuring incorrectly
E) Not creating a balanced scorecard

Question 30

Many companies do not identify and act on the correct non-financial measures.One of the four major mistakes that companies make is _______.In other words,companies attempt to measure complex phenomenon with one or two simple measures or use quantitative metrics to capture qualitative results for factors such as leadership.

A) Not linking measures to strategy
B) Not validating the links
C) Not setting the right performance targets
D) Measuring incorrectly
E) Not creating a balanced scorecard

Question 31

The _____________ metric is based on the idea that word-of-mouth communication,rather than any other metric,is the best predictor of firm growth and financial performance.

A) Net Promoter Score
B) Net Satisfaction Score
C) Customer Loyalty Score
D) Share of Wallet
E) Share of Mouth

Question 32

All of the following are questions that managers want answered about defensive marketing EXCEPT:

A) What is a loyal customer?
B) What is the role of service in defensive marketing?
C) What levels of word of mouth are needed to retain customers?
D) What specific aspects of service are most important for customer retention?
E) How can defection-prone customers be identified?

Question 33

Which of the following is NOT included in the list of questions managers and researchers want answered about defensive marketing?

A) What is a loyal customer?
B) How can defection-prone customers be identified?
C) What is the role of service in defensive marketing?
D) What aspects of service are most important for customer retention?
E) What aspects of service are most important for increasing market share?

Question 34

Toyota found that intent to purchase a Toyota automobile increased from 37 percent to _____ percent with a positive sales experience.

A) 85
B) 80
C) 75
D) 58
E) 45

Question 35

The research exploring the relative importance of service dimensions on overall service quality or customer satisfaction has confirmed _____ as the most critical dimension.

A) Assurance
B) Tangibles
C) Empathy
D) Responsiveness
E) Reliability

Question 36

According to field research conducted with senior executives in 60 companies,many firms do not identify and act on the correct nonfinancial measures.All of the following are among the major mistakes made by companies with respect to nonfinancial measures EXCEPT:

A) Not linking measures to strategy
B) Not validating
C) Not setting the right performance targets
D) Measuring incorrectly
E) All of the above are major mistakes made by companies with respect to nonfinancial measures

Question 37

The key drivers of service quality,customer retention and profits include:

A) The servicescape and internal marketing
B) The five dimensions of service quality and service encounters
C) External marketing communications and employee training
D) Public relations and direct marketing
E) All of the above

Question 38

Many companies do not identify and act on the correct non-financial measures.One four major mistakes that companies make is _______.In other words,they do not verify that the non-financial measures lead to financial performance.

A) Not linking measures to strategy
B) Not validating the links
C) Not setting the right performance targets
D) Measuring incorrectly
E) Not creating a balanced scorecard

Question 39

The ________ metric is obtained by summing up the customer lifetime values of the firm's customers.

A) The customer equilibrium
B) Customer equity
C) Customer empowerment
D) Fiscal value
E) Service blueprint value

Question 40

Which type of promotion has more credibility than other sources of information about a service?

A) Word-of-mouth
B) Personalized direct mail
C) Network television advertising
D) Publicity
E) Advertising in prestige magazines

Question 41

Share of wallet is the percentage of a customer's spending within a category that is captured by a given service.

Question 42

The Net Promoter Score is based on the idea that word-of-mouth communication,rather than any of the other metric,is the best predictor of growth and financial performance.

Question 43

Attracting a new customer is five times as costly as retaining an existing one.

Question 44

Consumers believe that advertisements in publications like Newsweek,Time and similar magazines have the highest level of credibility.

Question 45

From the inception of service quality,managers had highly sophisticated tools to measure the impact of improved service on profits.

Question 46

Service encounters are among the key drivers of service quality.

Question 47

The Net Promoter Score is based on just one survey question.

Question 48

Companies sometimes aim too high in setting improvement targets for nonfinancial measures of performance.Managers tend to make mistakes in this area by assuming:

A) Leading and lagging variables do not influence time utility
B) Qualitative metrics are more telling than quantitative metrics
C) 100 percent customer satisfaction is the only important goal
D) Statistical reliability and statistical validity are always important
E) The improvement of non-financial measures leads to offensive marketing

Question 49

Evidence shows that customer perceptions of quality do not affect consumer intentions.

Question 50

Service quality,like advertising,has a cumulative effect on a company's profit.

Question 51

Research by TARP Worldwide,Inc.found that only 7 percent of customers who are "neutral or very dissatisfied" say they will "definitely repurchase" from the same company.

Question 52

The Net Promoter Score is embraced by virtually all executives,researchers and loyalty experts as the "single most reliable indicator of a company's ability to grow."

Question 53

Service quality can help companies attract more and better customers to the business through offensive marketing.

Question 54

Research by TARP Worldwide,Inc.found that a full 96 percent of customers who report being "very satisfied" (i.e.,they are in the "top box" in satisfaction)say they will "definitely repurchase" from the same company.

Question 55

Defensive marketing can be used to reduce customer defection.

Question 56

According to field research conducted with senior executives in 60 companies,almost all companies identify and act on correct non-financial measures.