Chapter 2 Quiz - Customer Relationship Management
Q: Which of the following companies is most likely to be interested in customer relationship management (CRM)? A) Company that manufactures power tools for professional contractors B) Company that manufactures testing equipment for a laboratory builder C) Company that develops billing application software for a health-care provider D) Company that fabricates fiberglass insulation for a heating equipment manufacturer
A: A) Company that manufactures power tools for professional contractors Rationale: Companies that can benefit from knowing more about the end customer or shaping the needs and wants of the end customer will be most interested in CRM. The manufacturer of power tools must design, manufacture, and sell tools that appeal to customers. The other companies are suppliers that must satisfy purchasers' technical qualifications or expectations. For more information, see Module 2, Section B, Chapter 2, Topic 1
Q: For which of the following companies would customer relationship management (CRM) probably be a priority? A) Company with a customer base with diverse needs and interests B) Company that performs purchasing for a large manufacturer from several strategic suppliers C) Company with one large customer that specifies product/service features D) Company that provides raw materials for an extended supply chain in which value is added at later points in the chain
A: A) Company with a customer base with diverse needs and interests Rationale: CRM focuses on learning more about one's customers and using this knowledge to enhance product, increase customer satisfaction, and improve revenue and profit. The company with the diverse customer base can potentially benefit greatly from being able to gather and use more information about its customers. For more information, see Module 2, Section B, Chapter 2, Topic 1
Q: Which of the following describes a vulnerable customer? A) Customer who is about to discontinue service or stop purchasing the product B) Customer to whom the competition has been selling intensively C) Customer who is segmented into a low-value group and offered few incentives D) Customer who owns one of the firm's products that is becoming obsolete
A: A) Customer who is about to discontinue service or stop purchasing the product Rationale: The most accurate answer is that a vulnerable customer is one who is about to stop being a customer. This may be due to factors described in some of the incorrect choices. A vulnerable customer may perceive little value in the relationship, may have developed little loyalty, and may be willing to try a competitor. A customer with an obsolete product who does not receive customer care may soon become vulnerable. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: Which of the following is an example of a loyalty program? A) Free shipping for high-volume customers B) Introductory rates C) "Buy one, get two" offer D) Customer profiling system
A: A) Free shipping for high-volume customers Rationale: A loyalty program simultaneously rewards repeat or high-value customers and encourages continued business through special incentives. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: Which term describes the development of lifetime customers by training staff to optimize each customer's experience? A) Relationship building B) Operations C) Collaboration D) Analysis
A: A) Relationship building Rationale: Relationship building is the development of lifetime customers by training staff to optimize each customer's experience at each interaction. It also involves the use of customer data to design and focus initiatives to acquire and retain customers. For more information, see Module 2, Section B, Chapter 2, Topic 1
Q: In which type of customer segmentation are customers grouped by income? A) Segmentation by demographics B) Segmentation by value C) Segmentation by need D) Segmentation by channel
A: A) Segmentation by demographics Rationale: Demographic segmentation groups customers by group characteristics such as age, income, marital status, or family size. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: Which of the following describes customer-focused businesses? A) They educate customers throughout the purchasing process. B) They restrict communication and distribution channels to the most profitable options. C) They focus on customer care rather than product/service design and delivery. D) They gather information about customers but restrict its use to critical points in the supply chain.
A: A) They educate customers throughout the purchasing process. Rationale: Customer-focused businesses try to make their customers feel better educated about what they are buying before, during, and after the purchase. For more information, see Module 2, Section B, Chapter 2, Topic 1
Q: Which of the following describes lifetime customers? A) They have forged a win-win relationship with the business in question. B) They can increase revenue but have a neutral effect on profit. C) They are common in commodity markets driven by price rather than value. D) They are increasingly more expensive for a business to maintain as they increase demands.
A: A) They have forged a win-win relationship with the business in question. Rationale: Lifetime customers have a win-win relationship with the businesses they frequent. The customers gain greater satisfaction, while the business enjoys decreased marketing costs and increased revenue and profit potential. Lifetime customers are not common in markets competing on price rather than added value. For more information, see Module 2, Section B, Chapter 2, Topic 1
Q: In the supply chain model, customer relationship management (CRM) is instrumental in: A) creating more profitable customer relationships. B) ensuring supply at the retail level. C) aligning distributors with retailers. D) creating a higher number of one-time customers.
A: A) creating more profitable customer relationships. Rationale: The primary focus of CRM is on creating and maintaining more profitable relationships with customers, which has led organizations to transform themselves into customer-driven organizations. For more information, see Module 2, Section B, Chapter 2, Topic 1
Q: You are purchasing an item online and receive the following automated message: "Other customers like you have also ordered X. Would you like to learn more about this product now? If so, click here." This is an example of: A) cross-selling. B) a vulnerable customer program. C) up-selling. D) a win-back program.
A: A) cross-selling. Rationale: Cross-selling is a customer relationship management tactic made possible by the accumulation of data about a customer's buying habits. Customers are offered related products in addition to their current purchase. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: Sales training to increase business-to-business (B2B) customer loyalty should focus on: A) understanding the customers' business requirements. B) educating customers on the organization's core competencies. C) learning about the customers' core competencies. D) teaching customers the best way to resell the organization's product or service.
A: A) understanding the customers' business requirements. Rationale: B2B customers value a provider's understanding of how their business operates, what its limitations and concerns are, how the product or service fits into the customers' business, and what requirements may be part of the purchasing process. They would rather not re-educate each provider. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: How can an organization leverage social media for customer relationship management purposes during the development stage of a new product? A) Advertise the product in an attempt to drive pre-orders. B) Identify ideas or concepts that have the potential to meet customer needs. C) Identify customer segments that the product performs weakly in. D) Entice customers of major competitors to switch to using the product.
A: B) Identify ideas or concepts that have the potential to meet customer needs. Rationale: During the development stage, social networking sites like Facebook and Linkedin can be used to identify ideas or concepts that have the potential to meet customer needs and enhance profits. All the other options listed are areas that social media could help with but at later stages in the product life cycle. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: The costs of an organization's initial customer marketing and relationship building consistently result in expenses in excess of the revenues that are generated. Which of the following describes this situation? A) It is unsustainable, and the strategically set prices should be raised. B) It is sustainable if some customers can be retained long term. C) It is normal if the product is in the development stage but not if it's in the growth stage. D) It is normal if the product is in the growth stage but not if it's in the maturity stage.
A: B) It is sustainable if some customers can be retained long term. Rationale: The costs of acquiring new customers tend to be front-loaded in the relationship. If enough customers can be retained over the long term, the cost of retaining them declines as the profits derived from them increase. For more information, see Module 2, Section B, Chapter 2, Topic 1
Q: Which will likely have the most impact on a customer's perceived value of a product or service and may impact other strategic decisions because customers tend to use it as an order qualifier? A) Contact channel B) Pricing C) Advertising D) Segmentation
A: B) Pricing Rationale: Pricing is very important in customer relationship management strategy, as it is a strategic and critical decision that may be the difference between an order winner and an order loser. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: Which of the following is part of the correct definition of customer relationship management (CRM)? A) Focused on forecasting and analysis of information B) Tool to support existing and potential customer needs C) Tool to manage marketing, sales, supply planning, and production scheduling D) Primarily a software system for transactions and decision making
A: B) Tool to support existing and potential customer needs Rationale: Information gathered in the CRM process is used to support service to customers and potential customers and sales and marketing decisions, not resource and production planning. For more information, see Module 2, Section B, Chapter 2, Topic 1
Q: A benefit of an organization implementing customer segmentation is the ability to: A) quickly determine sales territories. B) identify the best way to fulfill customer needs. C) target promotions to specific markets. D) determine multiple pricing structures by market.
A: B) identify the best way to fulfill customer needs. Rationale: Customers within the same segment typically have the same needs, although true customer segmentation will equate to a segment of one. The other options are more applicable to market segments than to customer segments. For more information, see Module 2, Section B, Chapter 1, Topic 2
Q: In the development stage of customer relationship management (CRM), customer ownership has which of the following characteristics? 1) Sense of partnership and mutual investment 2) Uncertainty due to incomplete CRM strategy 3) Involvement of key customers in crafting the product or service 4) Increased likelihood of early sales A) 1, 2, and 3 B) 2, 3, and 4 C) 1, 3, and 4 D) All of the above
A: C) 1, 3, and 4 Rationale: Customer involvement in developing a product or service, as well as a sense of partnership and mutual investment, are key components of customer ownership. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: When designing the customer relationship management strategy for computer algorithms for segmenting customers and prospects, which of the following is the best input data, according to best practices? 1) Expert opinion or assumptions 2) Demographics 3) Projected behavioral traits 4) Historical purchasing patterns A) 1 and 2 B) 2 and 3 C) 2 and 4 D) 3 and 4
A: C) 2 and 4 Rationale: Computer algorithms can be used to model customer behavior. A best practice is to base such algorithms on demographics and historical purchasing patterns and limit use of assumptions or projected behavioral traits. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: In a customer-focused organization, what is the starting point for new product development? A) Evaluating current customer product complaints B) Identifying a price point most acceptable to lifetime customers C) Identifying customer need D) Identifying a new market niche
A: C) Identifying customer need Rationale: In a customer-focused world, the starting point for a product is often customer need. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: Which of the following is a process change that would improve the time to market of customer relationship management (CRM) activities? A) Focusing attention on planning and executing rather than on analysis and feedback B) Removing value-added demand management tasks when feasible C) Minimizing the number of tasks that need to be performed sequentially D) Omitting customer value from measures of the number of win-back customers saved
A: C) Minimizing the number of tasks that need to be performed sequentially Rationale: CRM process strategy should focus on improving time to market by: Reducing demand management tasks to just those that are value-added. Executing demand management tasks as quickly as is feasible. Maximizing the number of tasks that can be performed concurrently rather than needing to be done sequentially. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: Which is the primary reason why organizations need to implement customer relationship management (CRM)? A) To create a single supply chain B) To improve sales volume even at the cost of profits C) To help ensure competitive survival D) To create a single contact channel
A: C) To help ensure competitive survival Rationale: Responding to change quickly has become the differentiator between winners and losers in today's business world. If businesses fail to understand that their prime mission is to satisfy their customers' needs and wants—to provide a product/service package rather than push boxes out the factory door—then those businesses will simply fail. CRM has been adopted as a competitive survival strategy. For more information, see Module 2, Section B, Chapter 2, Topic 1
Q: A business is attempting to create more powerful bonds with its customers by delivering greater customer satisfaction and mutual dependence. This business is pursuing a strategy of: A) niche marketing. B) customer segmentation. C) creating lifetime customers. D) competitive differentiation.
A: C) creating lifetime customers. Rationale: While businesses may employ customer segmentation, competitive differentiation, and niche marketing to appeal to customers, this strategy describes the creation of lifetime customers. For more information, see Module 2, Section B, Chapter 2, Topic 1
Q: Which is the best definition of data mining? A) Designing data collection tools B) Making customer data available to everyone involved in customer relationship management at every contact point C) Storing customer data from different collection points in a retrievable format D) Analyzing collected data to search for previously unknown relationships
A: D) Analyzing collected data to search for previously unknown relationships Rationale: Data mining is the process of studying data to search for previously unknown relationships. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: Which of the following types of customer relationship management (CRM) campaigns are different enough that they typically require separate planning and cross-training of marketing and sales professionals? A) Campaigns for customer segments such as those preferring contact by direct mail or by email B) Campaigns for up-selling versus cross-selling C) Campaigns for television versus radio advertising D) Campaigns for customer types such as prospects or loyal customers
A: D) Campaigns for customer types such as prospects or loyal customers Rationale: Organizational structure is an issue for CRM strategy because of the different types of customers that each require different types of sales and marketing campaigns: prospective customers, vulnerable customers, win-back customers, and loyal customers. CRM teams can specialize in each type of campaign or perform job rotation to learn the most effective approaches to succeeding with each type. Cross-selling and up-selling are both part of loyal customer campaigns; television and radio are both part of media-based advertising campaigns; and segment preference for direct mail or email is part of direct marketing campaigns. For more information, see Module 2, Section B, Chapter 2, Topic 2
Q: You are ordering a camping tent through the call center for a recreational equipment manufacturer. The operator notes that for a little more money you could receive significantly more value in another tent model. This is an example of: A) a loyalty program. B) a win-back program. C) cross-selling. D) up-selling.
A: D) up-selling. Rationale: Up-selling is a customer relationship management tactic in which customers are offered higher-priced or more profitable items instead of the item they were originally considering. The operator in this case may be supported by a workflow that suggests specific models and links to more data in an electronic catalog or data about the customer's previous purchases that suggest a tendency toward higher-priced purchases. For more information, see Module 2, Section B, Chapter 2, Topic 2