Question 1

Customers create long-term value because they have __________ .&#10;A) money&#10;B) memories&#10;C) needs&#10;D) values

Accepted Answer

memories&#10;

Question 2

The actual economic value of any business enterprise can measured in terms of:&#10;A) the discounted net present value of the future stream of cash flow&#10;B) the future value of the net present cash flow&#10;C) the discounted net present value of average past earnings&#10;D) the future value of past net cash flow

Accepted Answer

The discounted net present value of the future stream of cash flow is the correct method for measuring the actual economic value of a business enterprise. This approach accounts for the time value of money, discounting future cash flows to their present value to provide a more accurate assessment of a business's worth.

Question 3

Creating maximum customer value requires:&#10;A) prioritizing long-term value over short-term value&#10;B) prioritizing short-term value over long-term value&#10;C) balancing short-term value with long-term value&#10;D) focusing on long-term value to the exclusion of short-term value

Accepted Answer

Balancing short-term value with long-term value is essential for creating maximum customer value. This approach ensures that immediate customer needs and satisfaction are met while also investing in the future relationship and value proposition, leading to sustained customer loyalty and business success.

Question 4

Traditional measures of financial success emphasize:&#10;A) prioritizing long-term value over short-term value&#10;B) prioritizing short-term value over long-term value&#10;C) balancing short-term value with long-term value&#10;D) focusing on long-term value to the exclusion of short-term value

Accepted Answer

Traditional measures of financial success often emphasize prioritizing short-term value, such as quarterly earnings and immediate financial returns, over long-term value. This focus can sometimes lead to decisions that boost short-term financial performance at the expense of long-term sustainability and growth.

Question 5

Legacy metrics include all of the following except:&#10;A) quarterly product sales&#10;B) number of new customers acquired&#10;C) Return on Customer&#10;D) return on investment

Accepted Answer

Return on Customer (ROC) is not considered a legacy metric; it's a more modern approach to evaluating the value a customer brings over their lifetime, unlike traditional metrics such as quarterly sales or ROI.

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:&#10;A) advertising&#10;B) free shipping&#10;C) lower prices&#10;D) service enhancement

Accepted Answer

Jeff Bezos, the founder of Amazon, has emphasized the importance of investing in customer-centric areas such as free shipping, lower prices, and service enhancement to build long-term customer relationships. Advertising, while important, is not directly mentioned by Bezos as a priority in the context of treating the customer as a financial asset.

Question 7

Which of the following reasons help explain why companies tend to focus on short-term performance?&#10;A) the investment community's obsession with short-term performance&#10;B) companies feel powerless to change&#10;C) customers' obsession with short-term performance&#10;D) a and b&#10;E) a and c

Accepted Answer

Companies often focus on short-term performance due to pressure from the investment community, which prioritizes immediate financial results, and because they may feel powerless to change entrenched short-term practices.

Question 8

Customer equity includes the LTV of:&#10;A) past and present customers&#10;B) present and future customers&#10;C) present customers only&#10;D) past, present, and future customers

Accepted Answer

Customer equity includes the lifetime value (LTV) of present and future customers, as it is a forward-looking measure that estimates the total value a business will derive from their entire relationship with a customer.

Question 9

Gupta and Lehmann's customer equity study showed that customer equity was measurably impacted most by:&#10;A) reducing the cost of new customer acquisition&#10;B) increasing customer retention rates&#10;C) raising product margins&#10;D) increasing stock prices

Accepted Answer

Gupta and Lehmann's study found that increasing customer retention rates had the most significant impact on customer equity. This is because retaining customers typically leads to repeat purchases and often at a lower cost than acquiring new customers, thereby increasing the lifetime value of the customer base.

Question 10

Losing a customer's business due to circumstances beyond a company's control is referred to as:&#10;A) customer attrition&#10;B) customer defection&#10;C) customer retention&#10;D) &#34;firing&#34; an unprofitable customer

Accepted Answer

Customer attrition refers to the loss of clients or customers, which can occur for reasons beyond a company's control, such as changes in customer preferences, financial issues, or competitive actions.

Question 11

All of the following are factors in defining customer equity except:&#10;A) acquiring more customers&#10;B) acquiring more valuable customers&#10;C) reducing customer attrition&#10;D) increasing service costs per customer

Accepted Answer

The answer of All of the following are factors in...

Question 12

The metric that measures how well an enterprise is using customers to create short-term and long-term value is:&#10;A) return on investment&#10;B) Return on Customer&#10;C) return on equity&#10;D) total shareholder return

Accepted Answer

The answer of The metric that measures how well an...

Question 13

Value harvesters are companies whose:&#10;A) customer value rate is below their cost of capital&#10;B) customer value rate is above their cost of capital&#10;C) customer value rate is equal to their cost of capital&#10;D) customer value rate is below zero

Accepted Answer

The answer of Value harvesters are companies whose:&#10;A) customer value...

Question 14

Predictive modeling includes all of the following steps except:&#10;A) devising an equation for LTV that includes data on measurable behaviors&#10;B) identifying the most predictive variables currently available&#10;C) generating a second equation to predict an individual customer's LTV&#10;D) using transactional data to calculate LTV retrospectively

Accepted Answer

The answer of Predictive modeling includes all of the following...

Question 15

All of the following represent lifestyle changes relevant to predicting LTV change except:&#10;A) A customer signs up for an e-mail newsletter.&#10;B) A privately held business goes public.&#10;C) A customer earns an advanced degree.&#10;D) A customer's health status changes.

Accepted Answer

The answer of All of the following represent lifestyle changes...

Question 16

Define &#34;customer equity&#34; 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?

Accepted Answer

The answer of Define &#34;customer equity&#34; and explain why this...

Question 17

Explain fully why ROC = TSR.

Accepted Answer

The answer of 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?

Accepted Answer

The answer of Explain the difference between value creators, value...

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?

Accepted Answer

The answer of How would a company calculate its ROC?...

Question 20

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

Accepted Answer

The answer of List the four leading indicators for predicting...

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