Question 1

Retention strategies based on social bonds:
A) Build long-term relationships through social and interpersonal as well as financial bonds
B) Use a strategy of mass customization
C) Are concerned about maintaining customer intimacy
D) Are the most difficult of the retention strategies to initiate
E) Create high opportunity costs

Accepted Answer

Building long-term relationships through social and interpersonal as well as financial bonds is the most effective retention strategy as it focuses on establishing a strong social connection with customers. It helps in creating a sense of loyalty towards the brand and makes customers feel valued. It also leads to higher trust and increases the likelihood of repeat purchases.

Question 2

Every month the pest exterminator does a monthly spraying at Mike Wade's house. Every month Wade gripes that he is being ripped off by the exterminating company and how he's going to find a new one. But he never does change service providers due to:
A) The iteration principle
B) Customer inertia
C) Service standardization
D) Switching costs
E) Process reciprocity

Accepted Answer

Customer inertia refers to the tendency of customers to continue using a service provider out of habit or apathy, even if they are unhappy with the service or pricing. In this case, Mike Wade complains about the pest exterminator but does not switch to a new provider, indicating that he is experiencing customer inertia.

Question 3

According to the 80/20 rule:
A) Only 80 percent of a company's customers deserve good service
B) 20 percent of a company's customers produce 80 percent of the company's profit
C) 20 percent of a company's customers should be classified as defect-prone
D) Only 80 percent of a company's customers will be affected by service encounters
E) 20 percent of a company's customers will require little or no service

Accepted Answer

The 80/20 rule, also known as the Pareto Principle, states that 20 percent of a company's customers produce 80 percent of the company's profit. This means that focusing on satisfying and retaining this valuable 20 percent can have a significant impact on a company's success.

Question 4

Every time Tom and Betty stay at a Marriott Hotel, they earn points that can be used at a later date for free rooms, meals and other hotel amenities. Marriott is using _____ to implement its retention strategy.
A) Financial bonds
B) Social bonds
C) Customization bonds
D) Structural bonds
E) Security bonds

Accepted Answer

Marriott is using financial bonds as part of its retention strategy by offering points for stays that can be redeemed for free rooms, meals, and other amenities, creating a financial incentive for customers to return.

Question 5

Moonlight Catering has increased the deposit it requires before agreeing to cater an event to $300. This amount is nonrefundable and must be paid when Moonlight Catering is hired for the job. This increase in deposit will help Moonlight Catering achieve its goal of:
A) Customer enhancement
B) Prospecting
C) Increasing its value-added service
D) Customer satisfaction
E) Customer retention

Accepted Answer

Increasing the deposit and making it nonrefundable will ensure that the customers are serious about their event and will not cancel or back out, thus helping Moonlight Catering retain customers.

Question 6

Salespeople for college texts call on college instructors to sell them on using a particular text for their classes. Improvements in efficiency have led some publishers to stop making sales calls altogether on smaller colleges. It is a much better use of the sales force's time to call on schools with large classes and big adoption rates. From the customer's point of view, this application of the profitability tier:
A) Could be seen as demeaning
B) Will not cause any problems
C) Simply increases the importance of word-of-mouth communication
D) Is not profitable
E) Creates across-the-board customer enhancement

Accepted Answer

This approach could be seen as demeaning because it implies that smaller colleges are not worth the sales effort, potentially making them feel undervalued.

Question 7

Molly and Tom are getting married. Last month they hired a caterer for the wedding reception. This month they attended a wedding for which their chosen caterer had provided food, dishes and flowers. Neither thought the food was good and Molly worried that the dishes looked cheap. However, they feel they cannot change caterers at this date due to the large deposit required by the catering company when it took the job. Molly and Tom do not want to pay:
A) Extraneous expenses
B) Opportunity costs
C) Switching costs
D) Fixed costs
E) Retained costs

Accepted Answer

The cost that Molly and Tom are worried about is the cost of switching caterers due to the large deposit they paid to their current caterer. This is an example of switching costs.

Question 8

Members of Sam Goody's Replay Frequent Buyer Program receive a $15 gift certificate for every $150 in purchases made at Sam Goody, as well as a coupon each month for a 20-25 percent discount on the purchase of an unlimited number of CDs and/or cassettes from a specific music category. Sam Goody's Replay Frequent Buyer Program uses _____ to implement its retention strategy.
A) Financial bonds
B) Social bonds
C) Customization bonds
D) Structural bonds
E) Security bonds

Accepted Answer

The program uses financial incentives, such as gift certificates and discounts, to encourage repeat purchases and retain customers.

Question 9

In many instances, customers develop loyalty to an organization in part because of costs involved in changing to and purchasing from a different firm. These costs are called:
A) Financial inertia
B) Opportunity costs
C) Switching costs
D) Fixed costs
E) Retained costs

Accepted Answer

Switching costs refer to the expenses incurred by a customer when switching to a different organization. These costs may include financial costs such as cancellation fees or non-financial costs such as time and effort spent researching and selecting a new provider. These costs can create a barrier to entry for new competitors and can help build customer loyalty.

Question 10

Miller & Sons Funeral Home has handled all of the funeral needs for the Atwater family since 1957. The family believes that Miller & Sons offers them good value for their dollar and the Miller sons and the Atwater boys played on the same high school football team. Miller & Sons Funeral Home is using _____ to implement its customer retention strategy.
A) Economic bonds
B) Social bonds
C) Customization bonds
D) Structural bonds
E) Security bonds

Accepted Answer

The fact that the Miller sons and the Atwater boys played on the same high school football team suggests there is a social bond between the two families. This bond is likely a major reason why the Atwaters have continued to use Miller & Sons Funeral Home for their funeral needs. Therefore, Miller & Sons is using social bonds to implement its customer retention strategy.

Question 11

Every Thursday afternoon for almost thirty years, Margaret and Lillie have gotten a manicure at the same location. The manicure salon has changed ownership three times and has had two different names during that same period, but Margaret and Lillie still find it a convenient place to meet and share news about friends and relatives. Margaret's and Lillie's relationship with the manicure salon exemplifies how a service provider uses _____ to support its customer retention strategy.
A) Economic bonds
B) Social bonds
C) Customization bonds
D) Structural bonds
E) Security bonds

Accepted Answer

Margaret and Lillie's continued patronage of the manicure salon is due to the social bond they have formed with the location. They use it as a convenient place to meet and share news, which suggests that they value the relationship they have with the salon beyond just the service it provides.

Question 12

Step-by-Step day care center offers parents several other services not normally offered by day by day care centers. A caterer is present every morning when the children are dropped off to take orders for supper. When the parents pick up their children in the evening, their supper is ready for them to take home, too. A hair stylist comes to the center once a week and cuts the hair of any child whose parents request this service. A photographer comes to the center every three months to take updated pictures of children whose parents don't have the time to take their children to the photography studio. In this way, Step-by-Step is using _____ to support its customer retention strategy.
A) Financial bonds
B) Social bonds
C) Customization bonds
D) Structural bonds
E) Security bonds

Accepted Answer

Step-by-Step day care center is using customization bonds to support its customer retention strategy by offering services tailored to the individual preferences and needs of parents. These additional services make the customers feel valued and catered to, which creates a bond between them and the daycare center.

Question 13

The 80/20 two-tier scheme:
A) Is used to justify the philosophy that all customers deserve the same level of service
B) Assumes profitability does not determine who the best customers are
C) Assumes all customers within each tier are homogeneous
D) Is totally unrelated to marketing segmentation
E) Is accurately described by all of the above

Accepted Answer

The 80/20 two-tier scheme assumes that all customers within each tier are homogeneous, meaning they have similar characteristics and behavior. It divides customers into two tiers based on their level of profitability, with the assumption that the top 20% of customers are the most profitable. This scheme is related to marketing segmentation, as it is a way to identify different groups of customers based on their profitability. However, it does not necessarily prioritize providing the same level of service to all customers, as it is focused on maximizing profitability.

Question 14

A company that uses a four-tier scheme to segment is customers by profitability:
A) Is using usage segmentation
B) Identifies customers who need different sorts of attention
C) Can increase profitability by increasing sales to lower-level customers
D) Cannot use relationship marketing effectively
E) Is accurately described by all of the above

Accepted Answer

A four-tier scheme for segmenting customers by profitability is an example of customer segmentation based on profitability. This helps the company to identify customers who need different levels of attention and better serve high-profit customers while still attempting to raise the profitability of lower-level ones. The other choices are not correct: For A, usage segmentation refers to segmenting customers based on how they use the products or services, not profitability. For C, increasing sales to lower-level customers can raise revenue but not necessarily increase profitability. For D, relationship marketing can still be effective in this scenario as the company focuses more attention on high-profit customers, as customer segmentation helps them understand customers' needs better.

Question 15

Retention strategies built around customization bonds:
A) View employees as customers
B) Provide short-term competitive advantage
C) Use price as the primary marketing mix element
D) Focus on mass customization and customer intimacy
E) Have a low degree of service customization

Accepted Answer

Customization bonds focus on creating personalized experiences and building customer intimacy, which aligns with mass customization strategies.

Question 16

The development of strong customer relationships is strongly influenced by:
A) Legal barriers to loyalty programs
B) The composition of the buying center
C) Barriers the customer faces in leaving a relationship
D) Differences in organizational cultures
E) All of the above

Accepted Answer

Barriers the customer faces in leaving a relationship can have a significant impact on the development of strong customer relationships. It is easier to maintain a strong relationship when the customer faces difficulties or costs in switching to another supplier or brand. Legal barriers to loyalty programs, the composition of the buying center, and differences in organizational cultures may also affect customer relationships, but they are not as critical as the barriers that the customer faces in leaving the relationship.

Question 17

_____ arise(s) when the customer is required to pay a penalty to switch providers.
A) Fixed costs
B) Legal inertia
C) Financial inertia
D) Contractual costs
E) Opportunity costs

Accepted Answer

Contractual costs arise when a customer is required to pay a penalty to switch providers due to a contractual agreement with their current provider. This penalty can act as a barrier to switching, as the customer would incur a financial cost to do so.

Question 18

A company that uses a four-tiered system to rank the profitability of its customers is:
A) Expanding the 80/20 customer pyramid
B) Eliminating non-profitable customers
C) Using volume segmentation
D) Committed to providing service equality to its customers
E) Not very knowledgeable about its customers

Accepted Answer

The four-tiered system used by the company is a way of expanding the 80/20 customer pyramid, which refers to the principle that 80% of a company's profits come from 20% of its customers. By ranking customers based on profitability, the company can identify which customers fall within the top 20% and focus on retaining and satisfying them.

Question 19

Since service companies have determined they need not serve all customers equally well, they have divided their target markets according to:
A) Current and/or future profitability
B) Behavior
C) Usage
D) Volume
E) User characteristics

Accepted Answer

Service companies have determined they need not serve all customers equally well, they have divided their target markets according to current and/or future profitability.

Question 20

Retention strategies built around financial bonds:
A) Provide long-term profit increases
B) Use price as the primary marketing mix element
C) Are difficult to initiate
D) Provide long-term competitive advantage
E) Have a high degree of service customization

Accepted Answer

The answer of Retention strategies built around financial bonds:
A) Provide...

Quiz 7: Building Customer Relationships

Retention strategies based on social bonds:

Every month the pest exterminator does a monthly spraying at Mike Wade's house. Every month Wade gripes that he is being ripped off by the exterminating company and how he's going to find a new one. But he never does change service providers due to:

According to the 80/20 rule:

Every time Tom and Betty stay at a Marriott Hotel, they earn points that can be used at a later date for free rooms, meals and other hotel amenities. Marriott is using _____ to implement its retention strategy.

Moonlight Catering has increased the deposit it requires before agreeing to cater an event to $300. This amount is nonrefundable and must be paid when Moonlight Catering is hired for the job. This increase in deposit will help Moonlight Catering achieve its goal of:

In many instances, customers develop loyalty to an organization in part because of costs involved in changing to and purchasing from a different firm. These costs are called:

The 80/20 two-tier scheme:

A company that uses a four-tier scheme to segment is customers by profitability:

Retention strategies built around customization bonds:

The development of strong customer relationships is strongly influenced by:

_____ arise(s) when the customer is required to pay a penalty to switch providers.

A company that uses a four-tiered system to rank the profitability of its customers is:

Since service companies have determined they need not serve all customers equally well, they have divided their target markets according to:

Retention strategies built around financial bonds: