Question 1

Lost-for-good relationships tend to be characterized by all of the following except:
A) Excellent staying power
B) Frequent communications
C) Joint planning
D) Requirement for adjustments
E) Variable performance

Accepted Answer

The answer of Lost-for-good relationships tend to be characterized by...

Question 2

Cranes Inc.gives its printing orders to multiple suppliers.These suppliers may have a share of the business in either the current period or future periods.However,one of these suppliers,Paramount Inc.,receives a considerable percent of Cranes' printing orders,though the orders taper or augment periodically.Paramount can be best classified as a(n):
A) Lost-for-good customer
B) Always-a-share customer
C) Never a share supplier
D) New supplier
E) Prospective customer

Accepted Answer

Paramount Inc. is described as receiving a considerable percentage of Cranes' printing orders, even if the orders taper or augment periodically. This suggests that Paramount is an "Always-a-share" customer for Cranes, meaning that they consistently have a share of the business. This is different from a "Never a share" supplier, who would never receive any business from Cranes, or a "New supplier" or "Prospective customer," who have not yet established a relationship with Cranes. A "Lost-for-good" customer would be one that Cranes used to do business with but has since lost as a customer.

Question 3

Always-a-share sellers can move the account toward the lost-for-good type in all of the following ways,EXCEPT:
A) By seeking longrun supply contracts
B) By building interpersonal linkages
C) By fluctuating performance and business share from year to year
D) By attempting to forge technical ties
E) By meeting customer criteria for becoming a preferred supplier

Accepted Answer

Fluctuating performance and business share from year to year may prevent a seller from being categorized as a lost-for-good type, as it indicates a willingness to adjust and improve their approach. The other options (A, B, D, and E) all involve efforts to establish long-term relationships with customers, which could lead to the seller becoming a preferred or trusted supplier, and therefore less likely to be replaced.

Question 4

With an 80 percent chance of continuing a lost-for-good relationship each year,the probability of holding the account through the sixth year is:
A) 0.001
B) 0.2621
C) 0.0209
D) 0.1333
E) 0.80

Accepted Answer

To calculate the probability of holding the account through the sixth year, we need to multiply the chances of continuing the relationship for each of the six years. This can be calculated as follows:

0.8 x 0.8 x 0.8 x 0.8 x 0.8 x 0.8 = 0.262144

Rounding to four decimal places, the answer is 0.2621, which corresponds to choice B.

Question 5

Which of the following observations is TRUE of always-a-share relationships?
A) Suppliers are largely interchangeable
B) Customers are tied to a system
C) They face significant switching costs
D) Customers always purchase from a single vendor
E) Relationships are cemented by switching costs

Accepted Answer

In always-a-share relationships, suppliers are largely interchangeable, meaning customers can easily switch between them without significant costs or barriers.

Question 6

Always-a-share customers:
A) Are tied to a system
B) Can allocate their purchases to several vendors
C) Face significant switching costs
D) Maintain a consistency in their purchase pattern
E) Involve suppliers who are not interchangeable

Accepted Answer

Always-a-share customers can allocate their purchases to several vendors, as they do not have exclusive loyalty to one supplier.

Question 7

Differentiating the offering on dimensions that forge structural ties and create exit barriers will tend to move the relationship toward the:
A) Lost-for-good variety
B) Always-a-share variety
C) Marginal variety
D) Average variety
E) Never a share variety

Accepted Answer

Differentiating the offering on dimensions that forge structural ties and create exit barriers tends to create a "lost-for-good" relationship, where the customer is less likely to switch to competitors due to the high costs or difficulties associated with leaving the relationship.

Question 8

Identify the INCORRECT statement about lost-for-good relationships.
A) They are relationships cemented by switching costs
B) These relationships motivate retention by accentuating the "dark side"
C) Consistent high performance is required to retain these accounts
D) These types of accounts do not have excellent staying power
E) Here the prospects of a customer returning to the incumbent are remote

Accepted Answer

This statement is incorrect as lost-for-good relationships do have excellent staying power as it is unlikely for the customer to return to the incumbent.

Question 9

Successful suppliers focus upon _____ to retain new customers.
A) Contractual protections
B) Customer needs
C) Short-term profits
D) Cutting all costs of serving customers
E) Maximizing system wide costs

Accepted Answer

Successful suppliers focus on understanding and meeting their customers' needs in order to retain them. Contractual protections may be important, but they will not necessarily create loyalty. Focusing on short-term profits or cutting costs at the expense of customer satisfaction is likely to lead to customer churn, and maximizing system wide costs does not relate to retaining customers at all.

Question 10

Relationships cemented by switching costs are called:
A) Costly relationships
B) Lost-for-good relationships
C) Grudging relationships
D) Troubled relationships
E) Always-a-share relationships

Accepted Answer

Relationships cemented by switching costs are referred to as lost-for-good relationships because it is difficult and costly for customers to switch to a competitor once they have invested time, money, and effort in a certain vendor or product. This creates a sense of loyalty even if the customer is dissatisfied with the product or service. Hence, these relationships are considered lost-for-good as it is challenging to win back customers once they have made such investments.

Question 11

In case of _____,NPV can be seen as a function of retention rates,which remain at the same level in each buying period.
A) New supplier accounts
B) Always-a-share accounts
C) Lost-for-good accounts
D) Prospective customer accounts
E) Never-a-share supplier accounts

Accepted Answer

Always-a-share accounts refer to customers who always purchase from the same company and have a high retention rate, meaning they continually buy from the company. In this case, NPV can be seen as a function of retention rates that remain at the same level in each buying period. This is because these customers are predicted to remain loyal and continue buying from the company, resulting in predictable future cash flows.

Question 12

Due to a linear relationship between retention and net present value,efforts to boost retention yield the same incremental profits at various retention levels for:
A) Always-a-share customers
B) Lost-for good customers
C) Never-a share customers
D) Marginal customers
E) Average customers

Accepted Answer

The answer of Due to a linear relationship between retention...

Question 13

Warehouse rackings and franchises are examples of:
A) Sensors
B) Interchangeable suppliers
C) Never-a-share customers
D) Lost-for-good customers
E) Always-a-share customers

Accepted Answer

Warehouse rackings and franchises are examples of "lost-for-good" customers because once they are lost, they are unlikely to return due to the high switching costs or long-term contracts involved.

Question 14

The foregone value of investments plus economic penalties/expenses associated with finding,evaluating and using a new supplier are called:
A) Opportunity costs
B) Distribution costs
C) Switching costs
D) Supplier costs
E) Retention costs

Accepted Answer

The foregone value of investments and economic penalties/expenses associated with finding, evaluating, and using a new supplier are referred to as switching costs. This is because switching suppliers entails a significant economic penalty, such as potential lost profits or expenses related to switching to another supplier. As a result, the correct answer is C, switching costs.

Question 15

In this type of account,the buyer can taper or augment purchases in increments and multiple suppliers can have a share of a customer's business in either the current period or future periods.
A) Lost-for-good customer
B) Former customer
C) Always-a-share customer
D) Never-a-share customer
E) Limited-appeal customer

Accepted Answer

This type of account is called an "always-a-share customer" because multiple suppliers can have a share of the customer's business in either the current period or future periods. The term "always-a-share" implies that the customer is not exclusive to any one supplier and is open to working with multiple suppliers. The customer can taper or augment purchases in increments, which makes it easier for multiple suppliers to have a share of the customer's business.

Question 16

At _____,with the curvilinear relationship between retention and NPV,retention gains at the high end tend to dwarf gains obtained on the low end.
A) Always-a-share accounts
B) Lost-for good accounts
C) Never-a share accounts
D) Marginal accounts
E) Average accounts

Accepted Answer

Lost-for-good accounts are those where customer retention directly impacts the Net Present Value (NPV) because once a customer is lost, they are unlikely to return. In these cases, improving retention, especially among customers who are already inclined to stay, can significantly increase NPV, more so than focusing on those with a lower probability of staying.

Question 17

The challenge of "_____" will pivot on the relationship development process and emphasize the strategy of forging relational ties through role performance,social ties,technical linkages,investments and contracts.
A) Building
B) Strengthening
C) Running
D) Managing
E) Planning

Accepted Answer

The use of words like "forge" and "development process" suggest that this challenge involves building new relationships rather than strengthening existing ones (B). Running (C), managing (D), and planning (E) do not incorporate the same emphasis on relationship development.

Question 18

Supplier action and market evolution,such as plug compatibility and software standards have dramatically lowered exit barriers in the field of computers,moving the exchange from:
A) Lost-for-good toward always-a-share
B) New supplier toward prospective supplier
C) Always-a-share toward lost-for-good
D) Prospective supplier toward new supplier
E) Always-a-share toward prospective supplier

Accepted Answer

Plug compatibility and software standards make it easier for customers to switch between suppliers, thus moving the market from a "lost-for-good" scenario, where losing a customer once means losing them forever, to an "always-a-share" scenario, where suppliers can always win back customers or share them with competitors due to lower exit barriers.

Question 19

_____ are usually purchased on an always-a share basis.
A) Office supplies
B) Computer systems
C) Telecommunication systems
D) Warehouse rackings
E) Franchises

Accepted Answer

The answer of _____ are usually purchased on an always-a...

Question 20

In lost-for-good accounts,
A) Customers can allocate their purchases to several vendors
B) A period of no purchases can be followed by a period of high purchases
C) Suppliers are largely interchangeable
D) Switching costs are significant
E) Customers are not tied to a system

Accepted Answer

In lost-for-good accounts, switching costs are significant, meaning that once a customer switches away from a supplier, they are unlikely to return due to the high cost of switching back. This contrasts with situations where suppliers are easily interchangeable or where customers are not tied to a specific system, making it easier for them to switch between suppliers without incurring significant costs.

Quiz 16: Customer Retention and Maximization

Lost-for-good relationships tend to be characterized by all of the following except:

Always-a-share sellers can move the account toward the lost-for-good type in all of the following ways,EXCEPT:

With an 80 percent chance of continuing a lost-for-good relationship each year,the probability of holding the account through the sixth year is:

Which of the following observations is TRUE of always-a-share relationships?

Always-a-share customers:

Differentiating the offering on dimensions that forge structural ties and create exit barriers will tend to move the relationship toward the:

Identify the INCORRECT statement about lost-for-good relationships.

Successful suppliers focus upon _____ to retain new customers.

Relationships cemented by switching costs are called:

In case of _____,NPV can be seen as a function of retention rates,which remain at the same level in each buying period.

Due to a linear relationship between retention and net present value,efforts to boost retention yield the same incremental profits at various retention levels for:

Warehouse rackings and franchises are examples of:

The foregone value of investments plus economic penalties/expenses associated with finding,evaluating and using a new supplier are called:

In this type of account,the buyer can taper or augment purchases in increments and multiple suppliers can have a share of a customer's business in either the current period or future periods.

At _____,with the curvilinear relationship between retention and NPV,retention gains at the high end tend to dwarf gains obtained on the low end.

The challenge of "_____" will pivot on the relationship development process and emphasize the strategy of forging relational ties through role performance,social ties,technical linkages,investments and contracts.

Supplier action and market evolution,such as plug compatibility and software standards have dramatically lowered exit barriers in the field of computers,moving the exchange from:

_____ are usually purchased on an always-a share basis.

In lost-for-good accounts,