Deck 7: Building Customer Relationships

Question 1

_____ marketing focuses on keeping and improving current customers, rather than concentrating on acquiring new customers.

A) Transaction
B) Expansion
C) Relationship
D) Strategic
E) Benefit

Answer 1

C

Question 2

Marlon Johnson is a government auditor and works for Taylor & Litford firm. He is the one who checks to see that city and county governments have complied with accounting principles. As an auditor, Johnson sometimes will spend six weeks in one office while he checks its accounting records. The closeness of the relationship that Johnson builds with the government employees he works with was realized by Taylor & Litford when Johnson left the firm, went to work for another one and took his clients with him. This is an example of how _____ benefits can be both helpful and harmful.

A) Confidence
B) Reliability
C) Social
D) Transactional
E) Economic

Answer 2

C

Question 3

In acquaintance relationships, firms generally focus on:

A) Creating service offering awareness
B) Inducing product trial and adoption
C) Gaining specific knowledge of customer's needs
D) Providing value comparable to the competition
E) Creating clear and easily comprehended communications

Answer 3

D

Question 4

Sondra has been having her haircut by Logan, a hairstylist at Dazzles, for five years. She has continued to use the same hairstylist even though the price of a haircut at Dazzles is $10 higher than at competing hair salons. Logan does an excellent job cutting her hair and staying up to date on the latest hairstyles and hair care products. Sondra realizes _____ benefits from her relationship with Logan.

A) Reliability
B) Confidence
C) Transactional
D) Self-actualization
E) Transformational

Question 5

According to the _____, while advertising, sales and promotions pour profits into your company, there will always be some customer defection, which has the potential to grow larger.

A) Bucket theory
B) Iceberg principle
C) 80/20 principle
D) Service paradigm
E) Echo principle of marketing

Question 6

The _____ of a customer is the increased value or profit that accrues for each additional customer who remains loyal to a company rather than defecting to the competition.

A) Lifetime value
B) Attractiveness index
C) Profit performance quotient
D) Relationship benefit
E) Loyalty factor

Question 7

WedSafe is the name of a company that provides wedding insurance. For example, in the event that the wedding is called off, the couple can insure themselves against lose of their nonrefundable deposits. When its primary marketing effort is to make engaged couples aware of its services, it is in which stage of the customer relationship evolution?

A) Acquaintances
B) Leads
C) Strangers
D) Allies
E) Friends

Question 8

As a result of relationship marketing, customers experience specific relational benefits. These include:

A) Social support, esteem benefits and self-actualization benefits
B) The upper level benefits described on Maslow's hierarchy
C) Confidence benefits, special treatment benefits and social benefits
D) Trust, value and no switching costs
E) Social relationships and utilities

Question 9

A primary goal of firms at the friendship stage of the relationship is:

A) Customer retention
B) The creation of a unique product
C) Creating a competitive advantage through their marketing mix
D) Gaining a familiarity of how the customer creates its service offerings
E) The enhancement of customer relationships

Question 10

The primary goal of businesses that are in the first stage of their relationship with a customer is to:

A) Create financial bonds
B) Develop a long-lasting relational time horizon
C) Qualify the prospect as a customer
D) Initiate communications in order to attract them
E) Engage in problem solving sales

Question 11

According to the text, the lifetime value of a customer is not influenced by:

A) The average revenues generated per relevant time period over the lifetime
B) Sales of additional products and services over time
C) Referrals generated by the customer over time
D) The length of the average "lifetime"
E) The communication strategy

Question 12

How would a day care center operator benefit from the implementation of relationship marketing with the parents of three preschool children?

A) The children would benefit from socialization skills
B) The parents wouldn't have to go looking for a new facility to keep their children
C) The parents would ask for a reduced monthly rate
D) The parents would get to socialize with the other parents of children at their center
E) The parents would spread the word about their happiness with the services provided by the day care center

Question 13

WedSafe is the name of one of several companies that provide wedding insurance. For example, in the event that the wedding is called off, the couple can insure themselves against lose of their nonrefundable deposits. When its primary marketing effort is to satisfying its customers, it is in which stage of the customer relationship evolution?

A) Prospects
B) Leads
C) Friends
D) Associate
E) Acquaintances

Question 14

In which evolutionary stage of customer relationships is customer retention fostered by a service provider consistently provides customers with quality goods and services as well as good value over time?

A) Friendship
B) Affiliation
C) Acquaintanceship
D) Allies
E) Partnership

Question 15

How would you describe the sustainability of competitive advantage in the acquaintance stage of the customer relationship evolution?

A) Non-existent because the company's primary goal is to induce trial
B) Generally low with some variation on how the competition creates unique value
C) High even though it depends on how unique the service offering is
D) Medium because customer are heterogeneous
E) Generally low because of the expense associated with mass customization

Question 16

Which of the following is one of the ways an organization benefits from maintaining and developing a loyal customer base?

A) Employee retention
B) Customers' increasing expectations of more personalized service
C) A reactive market-growth strategy
D) The ability to engage in guerilla marketing
E) Competitor entrenchment

Question 17

According to the text, the relationships between businesses and their customers have the ability to evolve. In the first step of this evolution process, customers are identified as:

A) Acquaintances
B) Prospects
C) Strangers
D) Friends
E) Allies

Question 18

Following the acquaintance relationship in the evolution of customer relationships is the customers as _____ stage.

A) Allies
B) Associates
C) Friends
D) Partners
E) Supporters

Question 19

At the partnership stage of the customer relationship, the firm is most concerned with:

A) Creating a competitive advantage
B) Customer satisfaction
C) The enhancement of its relationship with the customer
D) Creating service loyalty
E) Customer retention

Question 20

The key to success in the _____ stage of the customer relationship is the firm's ability to organize and use information about individual customers more effectively than its competitors.

A) Friendship
B) Ally
C) Colleague
D) Comrade
E) Partnership

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

_____ 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

Question 38

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

Question 39

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

Question 40

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

Question 41

Aramark is a food service company that supplies meals to more than 200,000 hospital patients daily. To improve its service, it created a database that tracks patient preferences individually by hospitals, regionally and nationally. The accumulated database is used to provide better menus. Aramark's kitchen staff deliver the food and are referred to as hosts. All hosts have a minimum of 40 hours of training to teach them how to be courteous, efficient and quick. These trained hosts deliver customized meals from carts preloaded according to room number. According to patient surveys, Aramark has boosted patient satisfaction by almost 10 percent by providing customized meals. Aramark is using _____ in its customer retention strategy.

A) Financial bonds
B) Social bonds
C) Customization bonds
D) Structural bonds
E) Heterogeneity

Question 42

Moran Dry Cleaners operates in a medium-sized community. Its customers all live within a 20-mile radius of the cleaners. Moran provides its regular customers with several alternative pickup and delivery schedules rather than a single weekly pickup and delivery. It will pickup clothes in the morning and deliver them back clean in the afternoon if that is what a customer needs. Moran has found the increase in its total number of customers because of this service more than pays its additional operation expenses. This pickup and delivery system is an example of:

A) Mass customization
B) Mass marketing
C) Niche marketing
D) Focused marketing
E) Transactional marketing

Question 43

For the organization, relationship marketing increases customer purchases, lowers costs and creates free word-of-mouth advertising.

Question 44

New Bedford College has a two-year masters degree program designed for special education teachers. Thirty-five students enter the program each fall. The education department requires that the 35 students take the same classes. Classes are made available in sequence. If Beth wanted to take only one special education class to get her a teaching certificate in learning disabilities (LD), she would be unable to because she would not be able to participate in any carry-over projects from previous classes (This is a common teaching tool for the New Bedford education department faculty.). New Bedford College will avoid setting up a relationship with Beth because:

A) She is in the wrong segment
B) She and others like her are compatible
C) Her needs are homogeneous with many others
D) She would be a difficult customer
E) She would not be profitable in the short-run

Question 45

Customer retention strategies based on customization bonds:

A) Do not exist in business-to-business marketing
B) Create tying contracts, refusals to deal, exclusive dealing and areas of gray marketing
C) Are not concerned with the pricing element of the marketing mix
D) May include the customer intimacy approach
E) Support transactional marketing as well as relationship marketing

Question 46

The ability to segment customers narrowly based on profitability implications also raises questions of privacy for customers.

Question 47

United Jersey Bank offers customers, who have a combined balance of $3000 or more in a United Jersey Checking Account and Preferred Money Market Account, a service called United Jersey Preferred Banking. This service is designed to make banking more convenient and profitable for customers. United Jersey Preferred Banking eliminates monthly maintenance fees, provides unlimited free transactions at ATMs, preferred rates on personal loans, higher interest rates on savings with higher balances and a consolidated monthly statement. United Jersey Bank does not offer United Jersey Preferred banking to customers with a combined balance of less than $3000 in a United Jersey Checking Account and Preferred Money Market Account since these customers are:

A) In the wrong segment
B) Not divisible
C) Not profitable in the long run
D) Known as difficult customers
E) None of the above

Question 48

Which of the following is NOT a reason why a service firm may avoid a customer relationship with a particular customer?

A) Customer is in the wrong segment
B) Customer is not divisible
C) Customer is not always right
D) Customer is not profitable in the long run
E) Customer is difficult

Question 49

When customers and firms reach the friend level of their customer relationship, firms generally focus on providing value comparable to the competition.

Question 50

The Marriott Hotel introduced Express Check-Out service in response to customer frustration at waiting in long checkout lines. A guest's credit card receipt and hotel bill is left under his or her room door the morning of his or her scheduled departure. After checking the accuracy of the bill the guest simply leaves his or her room key in the room or in one of the key drop boxes at the front desk before leaving the hotel. Marriott's Express Check-Out allows the hotel to engage in:

A) Mass customization
B) Mass marketing
C) Niche marketing
D) Focused marketing
E) Transactional marketing

Question 51

Relationship marketing essentially represents a paradigm shift within marketing-away from an acquisitions/transaction focus toward a retention/relationship focus.

Question 52

Often, _____ are created by providing customized services to the client that are technology based and make the customer more productive.

A) Financial bonds
B) Social bonds
C) Customization bonds
D) Structural bonds
E) Heterogeneity

Question 53

The primary goal of relationship marketing is to build and maintain a base of profitable and committed customers through attraction, retention and customer enhancement.

Question 54

There is no way to calculate the lifetime value of a customer.

Question 55

The four-tiered system for measuring customer profitability uses usage segmentation.

Question 56

With relationship marketing, customers receive the specific inherent benefits of receiving service value and nothing more.

Question 57

The term customer intimacy is most closely related to the establishment of _____ bonds.

A) Financial
B) Social
C) Customization
D) Structural
E) Security

Question 58

Well-implemented retention strategies will have long-term success even if there is no solid base of service quality and customer satisfaction to build on.

Question 59

To be successful, a service provider must accept the fact that the customer is always right.

Question 60

Mass _____ entails designing products and services to fit each customer's individual needs.

A) Segmentation
B) Standardization
C) Individualization
D) Customization
E) Heterogeneity

Question 61

Gracie gets her haircut at a salon almost twenty miles from her house because the price is low and because Gracie went to school with the woman who owns the salon. What kind of retention strategy is being used in this example?

Question 62

What are the two types of switching barriers that oftentimes prevent dissatisfied customers from switching providers?

Question 63

What are the three types of benefits customers enjoy through relationship marketing?

Question 64

Describe the level 4 retention strategy that builds a relationship bond that is the most difficult to imitate.

Question 65

What are three types of customer relationships may not be beneficial to the firm?

Question 66

Bundling and cross-selling are ways to implement a Level 1 retention strategy.

Question 67

List the four stages in the evolution of customer relationships.

Question 68

Level 1 retention strategies are very useful in creating a long-term competitive advantage.

Question 69

Mass customization means allows service providers to provide customers with customized products at the standardized, mass-produced price.

Question 70

The best customers are the ones that generate the most profit.

Question 71

Why is the 80/20 rule significant to a service provider that is trying to improve its profitability?

Question 72

A theater that was once very popular is having decreased attendance at its movies even though its owner is providing his audience with the kind of movies they have enjoyed in the past. He is thinking about offering a program where customers earn free snacks with the purchase of a set number of tickets. Why might it be inappropriate for a movie theater to implement a financial rewards loyalty program?

Question 73

What are the three of benefits firms enjoy through relationship marketing?

Question 74

Customers never have any reservations about embracing a Level 4 retention strategy.

Question 75

What are four customer goals for organizations that engage in relationship marketing?

Question 76

Which retention strategy relies primarily on financial incentives?

Question 77

What is the primary goal of relationship marketing?

Question 78

How do service providers use the profitability tier?

Question 79

Jade Taylor has run an advertising agency long enough to understand that the customer is not always right. He is interested in identifying his profitable customers. Define the four profitability tiers that might help Jade to analyze his customer base?

Question 80

Discuss mass customization.