Question 1

The Diamond of Loyalty is made up of four different segments which consist of:
A)loyals, habitual, multibranders, switchers
B)loyals, value creators, multibranders, switchers
C)loyals, habitual, value diluters, switchers
D)loyals, habitual, multibranders, value diluters
E)value creators, habitual, multibranders, switchers

Accepted Answer

The Diamond of Loyalty consists of four segments: loyals, habitual buyers, multibranders, and switchers. These segments help businesses understand different customer types and their loyalty levels.

Question 2

Loyal long-term customers are not always more profitable than customers making one-time purchases for which of the following reasons?
A)Not all services have heavy customer acquisition costs.
B)They do not necessarily spend more than one-off purchasers.
C)They may expect price discounts.
D)Larger customers such as B2B may have significant bargaining power and negotiate lower prices.
E)All of the above

Accepted Answer

Each point mentioned (A through D) explains a scenario where loyal long-term customers might not always be more profitable than one-time purchasers, covering aspects like acquisition costs, spending habits, expectations for discounts, and bargaining power for lower prices.

Question 3

Companies engaging in 'offensive marketing' do all of the following EXCEPT:
A)emphasise attracting new customers
B)use the seven Ps to attract new customers
C)replace 'disloyal' customers who go to competitors with new customers
D)actively nurture existing customers with the aim of retention
E)actively encourage customers to switch from competitors

Accepted Answer

Offensive marketing is a strategy where companies focus on attracting new customers and replacing customers who go to their competitors. They achieve this by using the seven Ps of marketing, encouraging customers to switch from competitors, and actively nurturing existing customers. However, offensive marketing does not mean neglecting existing customers, and as such, companies engage in activities to retain them. Therefore, option D is the exception as it contradicts the offensive marketing strategy.

Question 4

The expected profit over the projected time of the relationship with a customer is called customer ________.
A)profit projection
B)value index
C)lifetime value
D)lifetime profitability
E)churn

Accepted Answer

Customer lifetime value (CLV) is the expected profit that a customer will bring to a company throughout their entire relationship. It takes into account the customer's purchasing patterns, frequency, and total revenue generated. This information is used to determine the marketing and retention strategies that can maximize customer value over time. CLV is an important metric for businesses looking to optimize revenue and profits.

Question 5

Economic benefits of customer loyalty often explain why one firm is more profitable than a competitor.However, profitable revenue streams are unlikely to apply equally in all industries.Long-term customer value is less likely to be significant when:
A)there are low margins on sale
B)there are high margins of sale
C)high marketing costs are required to obtain a new customer
D)there is a high sales volume per customer
E)there is a high word of mouth referral

Accepted Answer

Long-term customer value is less likely to be significant in industries where there are low margins on sale because the profit generated from each sale is minimal, making the accumulation of profit from a loyal customer less impactful compared to industries with higher margins.

Question 6

Which of the following best describe(s) loyal customers?
A)They continue to patronise a firm over the long term
B)Often patronise particular firms exclusively
C)Recommend a firm and its services to friends
D)Cost more to service than one-off customers
E)All of the above except d

Accepted Answer

All of the options (A, B, and C) describe loyal customers. Option D is incorrect since loyal customers can actually cost less to service as they require less marketing and acquisition spending compared to one-off customers.

Question 7

Reichheld and Sasser (1990) have suggested that annual profits per customer increase every year over seven years because of various factors.Which of the following is NOT one of the factors that they discovered created incremental profits?
A)Increased sales through price discounts to customers
B)Profit from referrals to other customers
C)Opportunities to cross-sell other services
D)Profit from increased purchases
E)Profit from reduced operating costs

Accepted Answer

Reichheld and Sasser (1990) discovered that incremental profits over seven years were created through factors such as profit from referrals, opportunities to cross-sell other services, profit from increased purchases, and profit from reduced operating costs. However, increased sales through price discounts to customers is not one of the factors they identified.

Question 8

The cost to attract a new customer is reported to be ________ times the cost to retain a current customer.
A)four to five
B)five to six
C)six to seven
D)seven to eight
E)eight to nine

Accepted Answer

The answer of The cost to attract a new customer...

Question 9

Having details of regular customers in the firm's database offers opportunities to:
A)reduce operating costs
B)increase purchases
C)have lower maintenance costs
D)cross-sell other company services
E)a and c

Accepted Answer

Having details of regular customers in the firm's database offers the opportunity to cross-sell other company services to them, which can increase revenue and profitability. However, having customer information may not necessarily reduce operating costs or lower maintenance costs.

Question 10

Short-term hard sell campaigns, managed for transactions not relationships, work best for ________ while partnership and preferred access programs work best for ________.
A)multibranders; switchers
B)switchers; multibranders
C)loyals; switchers
D)habituals; loyals
E)switchers; loyals

Accepted Answer

The answer of Short-term hard sell campaigns, managed for transactions...

Question 11

Companies have been moving from focusing on customer ________ and ________ towards a customer ________ focus.
A)service; delivery; revenue generating
B)acquisition; transaction; relationship
C)acquisition; service delivery; retention
D)service delivery; satisfaction; marginal costing
E)costs; revenue; relationship

Accepted Answer

The options "acquisition" and "transaction" refer to a focus on getting new customers and completing individual sales, while "relationship" refers to a focus on building long-term connections with customers. This shift towards relationship-building is becoming increasingly common.

Question 12

A service business can grow in more than one way.Which one of the following is NOT dependent on relationship management?
A)Encouraging existing customers to purchase higher value services
B)Terminating unprofitable customers
C)Reducing the turnover of customers
D)Attracting new customers
E)Encouraging existing customers to purchase more units of service

Accepted Answer

Attracting new customers is not directly dependent on relationship management, as it focuses on acquiring new clients rather than managing existing relationships.

Question 13

Which of the following is NOT one of the factors underlying profit growth?
A)Opportunities to cross-sell other company services
B)Reduced operating costs
C)Increased purchases
D)Positive word of mouth advertising
E)None of the above

Accepted Answer

All the options listed (A through D) are factors that can underlie profit growth. Cross-selling services, reducing operating costs, increasing purchases, and positive word-of-mouth advertising all contribute to increasing a company's profits.

Question 14

According to Dowling and Uncles (1997), heavy users are not always committed or exclusively loyal to one seller.They refer to this as:
A)spurious loyalty
B)undivided loyalty
C)multiple seller loyalty
D)polygamous loyalty
E)heterogeneous loyalty

Accepted Answer

Dowling and Uncles (1997) describe the phenomenon where heavy users are not always committed or exclusively loyal to one seller as "polygamous loyalty." This concept suggests that consumers may frequently purchase from multiple brands or sellers, rather than being exclusively loyal to just one.

Question 15

Active management of the customer base and customer loyalty is referred to as:
A)customer churn
B)customer asset management
C)customer loyalty management
D)customer relationship management
E)customer lifetime management

Accepted Answer

Customer asset management refers to the active management of the customer base and customer loyalty.

Question 16

Which of the following is NOT a segment identified in Knox's Diamond of Loyalty?
A)Loyals
B)Retainers
C)Habituals
D)Multibranders
E)Switchers

Accepted Answer

Knox's Diamond of Loyalty identifies four main segments of customer loyalty: Loyals, Habituals, Switchers, and Multibranders. "Retainers" is not a segment recognized in this model.

Question 17

According to David Maister (1997), ________ is/are no measure of excellence, ________ or profitability.
A)repeat customers; cost structures
B)volume; customer satisfaction
C)volume; sustainability
D)client lists; sustainability
E)customer lifetime value; sustainability

Accepted Answer

David Maister argues that volume (the number of customers or transactions) cannot be the measure of excellence, as it does not necessarily translate into sustainability or long-term profitability for the business. Therefore, option C is the correct choice because it reflects Maister's argument. The other choices, such as repeat customers or customer satisfaction, may be important factors for business success, but they are not directly discussed in Maister's statement.

Question 18

Grant and Schlesinger suggest analysing gaps between actual and potential profitability by considering:
A)current versus potential market share
B)current purchasing behaviour of customers in each target segment
C)impact if each consumer exhibited ideal behaviour (paid full price)
D)the length of time customers remain with the firm
E)all of the above

Accepted Answer

The best approach to analyze gaps between actual and potential profitability is to consider all of the above factors. Current versus potential market share, current purchasing behavior of customers in each target segment, impact if each consumer exhibited ideal behavior (paid full price), and the length of time customers remain with the firm are all important factors that can help identify where the gaps in profitability exist and how they can be addressed. Only when all of these factors are considered together can a comprehensive assessment of the firm's profitability potential be made.

Question 19

The term 'share of wallet' refers to:
A)total purchases a customer makes in the product category
B)number of offered services a customer purchases from a single firm
C)number of offered services a customer purchases from all firms
D)number of offered services a customer purchases from the major competitor
E)total purchases a customer makes from major competitors

Accepted Answer

'Share of wallet' refers to the number of offered services or products a customer purchases from a single firm, indicating the firm's share of the customer's total spending in that category.

Question 20

Profitable revenue streams are more likely to be profitable when long-term customers are involved.Which of the following is not a significant value in assessing this?
A)High marketing expenses are required to obtain new customers
B)High administration expenses are needed to enter a new customer
C)Servicing costs are relatively low
D)There are reasonable margins on sales
E)None of the above

Accepted Answer

All options A through D are significant in assessing the value of long-term customers in relation to profitable revenue streams. High marketing and administration expenses for new customers, low servicing costs, and reasonable margins on sales all contribute to the profitability of long-term customer relationships.

Quiz 13: Managing relationships and building loyalty

The Diamond of Loyalty is made up of four different segments which consist of:

Loyal long-term customers are not always more profitable than customers making one-time purchases for which of the following reasons?

Companies engaging in 'offensive marketing' do all of the following EXCEPT:

The expected profit over the projected time of the relationship with a customer is called customer ________.

Economic benefits of customer loyalty often explain why one firm is more profitable than a competitor.However, profitable revenue streams are unlikely to apply equally in all industries.Long-term customer value is less likely to be significant when:

Which of the following best describe(s) loyal customers?

Reichheld and Sasser (1990) have suggested that annual profits per customer increase every year over seven years because of various factors.Which of the following is NOT one of the factors that they discovered created incremental profits?

The cost to attract a new customer is reported to be ________ times the cost to retain a current customer.

Having details of regular customers in the firm's database offers opportunities to:

Short-term hard sell campaigns, managed for transactions not relationships, work best for while partnership and preferred access programs work best for .

Companies have been moving from focusing on customer and towards a customer focus.

A service business can grow in more than one way.Which one of the following is NOT dependent on relationship management?

Which of the following is NOT one of the factors underlying profit growth?

According to Dowling and Uncles (1997) , heavy users are not always committed or exclusively loyal to one seller.They refer to this as:

Active management of the customer base and customer loyalty is referred to as:

Which of the following is NOT a segment identified in Knox's Diamond of Loyalty?

According to David Maister (1997) , is/are no measure of excellence, or profitability.

Grant and Schlesinger suggest analysing gaps between actual and potential profitability by considering:

The term 'share of wallet' refers to:

Profitable revenue streams are more likely to be profitable when long-term customers are involved.Which of the following is not a significant value in assessing this?