Question 1

Two products with very different performance qualities can have the same conformance quality if both products deliver their respective promised quality.

Accepted Answer

Conformance quality means whether or not a product meets its intended specifications or standards. Therefore, if both products deliver their respective promised quality, they would have the same conformance quality despite having different performance qualities.

Question 2

The aim of customer relationship management is to keep the costs of meeting and tracking consumers as low as possible.

Accepted Answer

The aim of customer relationship management is to build strong and long-lasting relationships with customers by understanding their needs and preferences, creating personalized experiences, and providing excellent customer service. The focus is on increasing customer loyalty and retention, which may require investing in technology and resources.

Question 3

Activity-based costing tries to identify the real costs associated with serving each customer.

Accepted Answer

Activity-based costing is a method of cost accounting that attempts to identify the true costs associated with serving each customer by assigning costs to specific activities or processes that are necessary to deliver a product or service to a customer. This allows for a more accurate understanding of the costs involved in serving each customer, helping businesses to make better decisions about pricing and resource allocation.

Question 4

All companies should practice one-to-one marketing.

Accepted Answer

One-to-one marketing, while effective for personalized customer engagement and satisfaction, may not be suitable for all companies due to factors like business model, product type, market size, and resource availability.

Question 5

A customer touch point is the time when the customer makes a purchase.

Accepted Answer

A customer touch point refers to any interaction between a customer and a brand, including browsing a website, calling customer service, and receiving marketing emails, not just the moment of purchase.

Question 6

Customer profitability analysis is best conducted with the tools of an accounting technique called activity-based costing.

Accepted Answer

Customer profitability analysis involves identifying and allocating costs associated with serving specific customers. Activity-based costing is a method of allocating overhead costs to specific activities and then identifying the costs associated with each customer based on the activities they require. Therefore, customer profitability analysis is best conducted using activity-based costing.

Question 7

Consumers' expectations result exclusively from past buying experiences.

Accepted Answer

Consumers' expectations can also be influenced by advertising, word-of-mouth recommendations, and other external factors.

Question 8

A customer's profitability is judged on the basis of the lifetime stream of revenue and cost, not the profit from a particular transaction.

Accepted Answer

Customer profitability is judged based on the entire lifetime stream of revenue and costs associated with that customer, not just on the profit earned from a single transaction or purchase. This approach takes into account factors such as customer acquisition costs, ongoing marketing and support expenses, and any other costs associated with maintaining a long-term relationship with that customer. By considering the entire lifetime value of a customer, businesses can prioritize their resources and investments in a way that maximizes long-term returns and sustainable growth.

Question 9

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 of attracting, selling, and servicing the customer.

Accepted Answer

A profitable customer is one who generates more revenue than the cost of attracting, selling, and servicing them.

Question 10

A company should try to retain the customer only as long as the cost to discourage defection is lower than the lost profit.

Accepted Answer

This is a basic principle of customer retention economics. It is not sustainable to invest more in retaining a customer than the potential profit they may bring in the future. Therefore, companies should evaluate and balance the cost of retaining a customer against the lost profit from their defection.

Question 11

Customer lifetime value describes the net present value of the stream of future profits expected over the customer's lifetime purchases.

Accepted Answer

Customer lifetime value (CLV) is indeed the net present value of the future stream of profits that a customer is expected to generate over their lifetime purchases.

Question 12

Activity-based costing does not consider indirect, variable and overhead costs.

Accepted Answer

Activity-based costing explicitly considers indirect, variable, and overhead costs by assigning them to specific activities that drive them.

Question 13

Customer churn is how rapidly a store can move customers through its checkout facility or process.

Accepted Answer

Customer churn is actually a measure of how many customers stop doing business with a company. It is not related to checkout speed.

Question 14

Unprofitable customers who defect to a competitor should be encouraged to do so.

Accepted Answer

Unprofitable customers cost the company more money than they generate. Encouraging them to switch to a competitor can help the company reduce costs and focus on serving more profitable customers.

Question 15

Conformance quality and performance quality are identical in the marketing sense.

Accepted Answer

Conformance quality refers to how well a product meets established standards, while performance quality refers to the product's ability to perform its intended function. While both are important in marketing, they are not identical.

Question 16

For a magazine, subscription renewal rate is a good measure of retention.

Accepted Answer

Subscription renewal rate measures the percentage of subscribers who renew their subscriptions, indicating their loyalty and satisfaction towards the magazine. Hence, it is a good measure of retention.

Question 17

The best thing a company can do in the face of company mistakes is to discourage the customer from complaining.

Accepted Answer

Encouraging customers to complain and addressing their concerns is the best way to rectify company mistakes and improve customer satisfaction. Ignoring or discouraging complaints can lead to negative feedback and a damaged reputation.

Question 18

Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Accepted Answer

This is the definition of quality as stated by the American Society for Quality.

Question 19

Permission marketing presumes that consumers know what they want.

Accepted Answer

Permission marketing is based on the idea that consumers want to be engaged with marketing messages, but only if they have given explicit permission to receive them. This indicates that the consumer has some interest or need for the product or service being marketed. Therefore, it assumes that the consumer knows what they want or need.

Question 20

Customer satisfaction is the only way by which a firm can increase its profitability.

Accepted Answer

While customer satisfaction is crucial for retaining customers and encouraging repeat business, profitability can also be increased through other means such as cost reduction, pricing strategies, product diversification, and market expansion.

Quiz 5: Creating Long-Term Loyalty Relationships