Deck 12: Managing Relationships and Building Loyalty

Question 1

Define loyalty in a service context.

Answer 1

Loyalty is a customer's willingness to continue patronizing a firm over the long-term, preferably exclusively, and recommending the firm's products to others.

Question 2

Successful customer relationships cannot be built if a firm is selective about the segments they target.

Answer 2

False

Question 3

Special treatment benefits include being known by name by the service provider.

Answer 3

False

Question 4

Which of the following is NOT one of the strategies for developing loyalty bonds with customers?

A) Deepening the relationship
B) Lag-based bonds
C) Social bonds
D) Customization bonds
E) Structural bonds

Question 5

Which of the following is NOT one of the four customer tiers discussed by Zeithaml, Rust, and Lemon?

A) Platinum
B) Gold
C) Bronze
D) Iron
E) Lead

Question 6

Which of the following is NOT one of the key strategies used to reduce customer defections?

A) Eliminate nuisance customers.
B) Address key churn drivers.
C) Implement effective complaint handling and service recovery procedures.
D) Increase switching costs.
E) Analyze customer defections and monitor declining accounts.

Question 7

Which of the following are the three main zones of the satisfaction-loyalty relationship?

A) Direction; institution; affluence
B) Defection; indifference; affection
C) Detection; elimination; subversion
D) Detection; affluence; rejection
E) Direction; intention; rejection

Question 8

In the B2B context, the smaller firms as a group have a lot of bargaining power.

Question 9

Good relationships start with a good fit between customer needs and company capabilities.

Question 10

The wheel of loyalty is composed of which of the following three main components?

A) Create loyalty bonds; deliver quality service; segment the market
B) Create loyalty bonds; build higher level bonds; deliver quality service
C) Build a foundation for loyalty; create bundling; build higher level bonds
D) Build a foundation for loyalty; create loyalty bonds; reduce churn drivers
E) Create loyalty bonds; understand customer value; understand service value

Question 11

Which of the following is NOT one of the advantages to incremental profits of a loyal customer?

A) Profit from increased purchases.
B) Profit from decreased advertising.
C) Profit from reduced operating costs.
D) Profit from referrals to other customers.
E) Profit from price premiums.

Question 12

Defection describes customers who stop buying from a company and transfer their brand affinity to another supplier.

Question 13

Firms should not assume that the "right customers" are always the ___________.

A) ones that are easily delighted
B) high spenders
C) price sensitive customers
D) average income earners
E) least costly to acquire

Question 14

The key questions to ask when defining a firm's customer relationship strategy include all EXCEPT _____________.

A) What is the increase in profit from increase the share-of-wallet with our current customers?
B) How much customization or one-to-one marketing and service delivery is suitable and profitable?
C) How will top management feel about our strategy?
D) How should our value proposition change to increase customer loyalty?
E) How much time and resources can we provide to CRM right now?

Question 15

Steps to building a foundation of loyalty include all EXCEPT _____________.

A) delivering customer satisfaction
B) delivery service quality
C) segmenting the market to match customer needs and firm capabilities
D) acquiring customers who fit the core value proposition
E) managing the customer base through effective tiering

Question 16

Customers remain loyal to a firm because they experience relational benefits.

Question 17

The two ends of the customer satisfaction/loyalty relationship are terrorist and apostle.

Question 18

Most people can think of dozens of service firms they truly like and where they are committed to going back to.

Question 19

Many service firms put too much emphasis on value without enough consideration of the number of customers they will serve.

Question 20

In the worksheet for calculating customer lifetime value, sources of annual revenues include all EXCEPT _____________.

A) Annual account fee
B) sales
C) service fees
D) value of referrals
E) account management

Question 21

Describe the difference between miles and points on British Airways.

Question 22

Common failures in CRM implementation include all of the following EXCEPT _____________.

A) employee enthusiasm about CRM
B) inadequate support from top management.
C) inadequate understanding of customer lifetime value
D) lack of coordination
E) failure to reengineer business processes

Question 23

Vanguard's success is measured by which of the following?

A) Low redemption rates
B) High redemption rates
C) Low customer turnover
D) High customer turnover
E) Portfolio stability

Question 24

Describe the "Iron" customer segment discussed by Zeithaml, Rust, and Lemon.

Question 25

What are the three clusters of benefits that customers derive from relationships with the firm?

Question 26

Give an example of a firm discussed in the chapter that successfully built a strategy on serving customer segments that were neglected by established players that didn't perceive them as sufficiently "valuable."

Question 27

Why do firms benefit from a price premium with loyal customers?

Question 28

Common CRM applications include all of the following EXCEPT _____________.

A) Data collection
B) Marketing automation
C) Data entry
D) Sales force automation
E) Finance automation

Question 29

Explain what a "structural bond" means.

Question 30

Describe how Vanguard Group keeps its costs down to attract the right type of customer.

Question 31

Which of the following is NOT an aspect of ING Direct's no-frills strategy?

A) High interest rates
B) Offers only a handful of basic products
C) Lures low-maintenance customers
D) Firing customers who don't fit the profile
E) Increased contact with the bank

Question 32

Which of the following is NOT an example of common CRM applications?

A) Data collection
B) Data analysis
C) Market reinvestment
D) Sales force automation
E) Call center automation

Question 33

Describe the wheel of loyalty.

Question 34

DHL's less powerful accounts generate significantly lower profitability than their major accounts.

Question 35

Customer satisfaction based on the ACSI) is highly related to the stock price of individual firms.

Question 36

What did DHL find out about its large and small accounts?

Question 37

Discuss the framework of the five key processes involved in a CRM strategy.
e.g. face-to-face and online). The fourth process is information management. A firm's ability to maintain multichannel consistency and provide value creation, etc. rests on its management of information. Customer information demographics, etc.) and churn information turnover) are key aspects of information of which firms need to be aware. Finally, performance assessment allows a firm to know how well it is doing on creating value, achieving market and service delivery performance objectives, and its CRM process performance overall.

Question 38

Vanguard Group is very careful about acquiring the right type of customer.

Question 39

ING Direct could be called the fast-food model of consumer banking because it is about as no-frills as it gets.

Question 40

Part of British Airways' strategy is that customers can earn BA points and air miles on other airlines.

Question 41

Discuss how tiering helps a leading U.S. market research agency better understand its customers.

Question 42

Explain how AOL got itself into legal trouble with poor churn management.

Question 43

Discuss how Vanguard Group's pricing is set up to reward the right kind of customers.

Question 44

Discuss the benefits offered by British Airways to its Gold tier members.