Chapter 1 Quiz - Segmentation
Q: Which of the following is an example of the "voice of the customer" (VOC) technique? A) Customer design groups B) Brief checkoff customer satisfaction surveys printed on invoices C) Collated comments of sales representatives calling on specific customer groups D) Analysis of customer buying behaviors
A: A) Customer design groups Rationale: Customer design groups are an example of open-ended information gathering used by VOC to make complex customer perceptions more visible to a business. A brief checkoff survey does not capture complex information. Analysis of behaviors and analysis by others does not present the customer's own voice. For more information, see Module 2, Section B, Chapter 1, Topic 2
Q: Which of the following is the best value proposition for the customer segments described below? Segment A value profile: ongoing relationships and consistent lead times but not fast delivery; 15% of the market and 65% of revenue. Segment B value profile: low price and fast delivery; 60% of the market and 18% of revenue. A) Develop a reliable supply chain with dedicated agents for segment A and a highly automated, low-cost, fast delivery supply chain for segment B. B) Develop a reliable supply chain with dedicated agents for segment A and do not pursue sales with segment B. C) Develop a single fast and reliable supply chain with equal access to sales agents and/or highly automated sales for all segments. D) Develop a single fast and reliable supply chain but provide access to sales agents only to segment A.
A: A) Develop a reliable supply chain with dedicated agents for segment A and a highly automated, low-cost, fast delivery supply chain for segment B. Rationale: It is important for businesses to understand what customers want, why, and how much. This is called a value profile. Once the value profile has been created, a value proposition can then be drafted that details how each segment's perception of value will be fulfilled by the product or service. The value proposition is a key part of the promotional strategy and customer relationship. Value propositions are addressed in the customer-driven strategy, often in the form of segment-specific supply chains. Module 2, Section B, Chapter 1, Topic 2
Q: Which of the following constitutes a potentially appropriate way to segment a market? 1) Geography 2) Market potential 3) Commonsense assumptions 4) Age A) I, II, and IV B) I, III, and IV C) II, III, and IV D) I, II, III, and IV
A: A) I, II, and IV Rationale: Market segmentation and the deployment of the sales force can be based upon any of a number of criteria, including but by no means limited to geography, market potential, or age. Historically, market segments were based, in the worst case, on preconceptions about the behaviors or desires of certain groups or, in the best case, on research into small "representative" groups of customers. This type of predictive segmentation can be inaccurate. For more information, see Module 2, Section B, Chapter 1, Topic 2
Q: Which is a fundamental marketing concept upon which customer-focused marketing is based? A) Products and services have more than one market segment. B) Logistics and marketing strategy must focus on general market trends. C) Sales volume is more important than profitability. D) Product and service design must drive customer requirements.
A: A) Products and services have more than one market segment. Rationale: A fundamental marketing concept that is the basis for customer-focused marketing is that all products and services have more than one market segment. The primary justification for defining market segments is the marketing assertion that no single set of customer requirements describes all potential customers. Each customer will have unique requirements, but groups of customers with similar requirements can be discovered. For more information, see Module 2, Section B, Chapter 1, Topic 1
Q: Which method of segmentation is being used when a customer who frequently buys upgrades bypasses a telephone queue and gets immediate customer service? A) Segmentation by customer value B) Segmentation by customer needs C) Segmentation by preferred contact channel D) Segmentation by demographics
A: A) Segmentation by customer value Rationale: Customer value is defined as the measure of a company's contributions to its customers, based on the variety of products, services, and intangibles the company offers. In the past, organizations treated customers as if they were all the same. Each received the same level of service and was charged the same fees for the products they purchased, regardless of how they affected the organization's profit. Today more and more organizations are treating customers differently based on the differences in the customers' contributions to the bottom line. For more information, see Module 2, Section B, Chapter 1, Topic 2
Q: Which is true of the benefits of segmentation? A) Segmentation can generate a mutual dependency among buyers and sellers. B) Segmentation reduces the seller's return on its promotional budget. C) Segmentation benefits the seller but not the buyer. D) Segmentation continues to group more and more people in larger segments.
A: A) Segmentation can generate a mutual dependency among buyers and sellers. Rationale: Segmentation benefits organizations by making lifetime customer relationships more likely, because customers feel that the business is meeting their unique needs. This is a mutual dependency/mutual gain relationship. For more information, see Module 2, Section B, Chapter 1, Topic 1
Q: Which practice would help organizations craft targeted messages that would be appropriate for groups of individuals needing a higher degree of care and attention than others? A) Segmenting other supply chain partners B) Voice of the customer C) Project management process groups D) Frozen, slushy, and liquid time zones
A: A) Segmenting other supply chain partners Rationale: Other stakeholders may not count as supply chain partners but could still benefit from segmentation. These include regulatory bodies, auditors, the general public, specific communities, interest groups, unions, and so on. Segmentation could help the organization craft communications that were targeted toward the group. Segmenting these stakeholders by relative importance can help the organization decide how much time and money to devote to maintaining each relationship. For more information, see Module 2, Section B, Chapter 1, Topic 3
Q: When segmenting suppliers, which is the best criterion to use in identifying the most important supplier segment? A) Supplier's ability to advance strategic goals B) Suppliers whose subcomponents would require redesign of other subcomponents if substituted C) Organizational spend with each supplier D) Suppliers who have established relationships with buyers
A: A) Supplier's ability to advance strategic goals Rationale: One traditional way of segmenting suppliers was to focus on suppliers that did a lot of business with the organization. This may have prompted the organization to pursue a strategic relationship with that supplier. However, that supplier might only be supplying commodities or might be getting a lot of orders due to inertia (e.g., established relationships or design specifications that would require redesigning other subcomponents) more than because it deserves to have a strategic relationship. For more information, see Module 2, Section B, Chapter 1, Topic 3
Q: Grouping customers according to distinct values or needs refers to the tactic of: A) customer segmentation. B) demographic analysis. C) predictive analysis. D) market prioritization.
A: A) customer segmentation. Rationale: Customer segmentation is a key component of implementing customer-driven strategy, since it leads to a better understanding of customer values and needs and increased potential for success in responding to those values and needs. For more information, see Module 2, Section B, Chapter 1, Topic 2
Q: Which of the following is a benefit associated with customer segmentation? A) Shorter sales cycle B) Better ROI (return on investment) on promotion budgets C) Lower production costs D) Shorter time-to-market
A: B) Better ROI (return on investment) on promotion budgets Rationale: Customer segmentation allows businesses to learn customer desires and habits and design more effective promotional programs, resulting in a better ROI on promotional budgets. For more information, see Module 2, Section B, Chapter 1, Topic 1
Q: A new customer segment will buy an organization's product only if it has additional features that require a new product variant. This variant would increase sales volume and only slightly increase marginal profits. Based on a customer-driven marketing philosophy, what should this organization do? A) Reject the proposed new variant. B) Develop the proposed new variant at the proposed price to gain lifetime customers. C) Increase the size of this customer segment prior to making a decision. D) Develop the proposed new variant at a higher price to ensure increased profitability and sales volume.
A: B) Develop the proposed new variant at the proposed price to gain lifetime customers. Rationale: A customer-driven marketing philosophy indicates that profitability is more important than sales volume. Since this variant increases profits by even a small amount, it should be developed. Increasing the price of a product will not necessarily increase marginal profits, since it could reduce sales volume. For more information, see Module 2, Section B, Chapter 1, Topic 1
Q: Which of the following factors has led to greater customer focus in business? 1 Higher general quality of goods and services 2 Trend of increasing profit margins 3 Advances in technology 4 Greater global competition A) I, II, and III B) I, III, and IV C) II, III, and IV D) I, II, III, and IV
A: B) I, III, and IV Rationale: Advances in technology and competition in a worldwide free marketplace have benefited customers by raising their expectations for quality, trouble-free products and services. Higher quality, made possible through technology, has created increased customer expectations, which has in turn led to price as a differentiating factor. This has created a downward pressure on profit margin. Greater customer focus helps counter this pressure. For more information, see Module 2, Section B, Chapter 1, Topic 1
Q: How can a customer-focused business benefit from segmentation? A) It will be able to make sweeping generalizations about customers. B) It will learn more about individual customers. C) It will have access to more one-time customers. D) It will be able to charge more for each basic item.
A: B) It will learn more about individual customers. Rationale: With segmentation, customer-focused businesses have the opportunity to learn more about their individual customers, and they can use that information to increase sales and profit. For more information, see Module 2, Section B, Chapter 1, Topic 1
Q: What is the "voice of the customer" (VOC)? A) Method of determining customer value B) Method of customer research C) Method of customer segmentation D) Including customers in key marketing decisions
A: B) Method of customer research Rationale: The VOC is a customer research and measurement tool used to gain answers to complex marketing questions. It may include focus groups in which customers contribute to product or process design. For more information, see Module 2, Section B, Chapter 1, Topic 2
Q: A building supplies distributor has decided to invest in developing a self-service customer interface so that customers can order and manage their own accounts. This illustrates the use of customer segmentation. What customer characteristic is the distributor focusing on? A) Customer value B) Quality expectations C) Preferred channel D) Frequency of delivery
A: C) Preferred channel Rationale: The supplier has segmented the DC's customer base by its preferred channel, the technology customers prefer to use to contact the DC. This provides greater convenience for the customers and, eventually, cost savings for the supplier. Customer segmentation by customer value would prioritize service to customers according to the values their business represents to the supplier. Segmentation by customer needs, such as the need for short order turnarounds and complete and correct orders (quality), separates customers according to what the customer needs most from the supplier. For more information, see Module 2, Section B, Chapter 1, Topic 2
Q: As customers begin to assume that products and services will be of high quality, the competitive differentiator becomes: A) regional closeness to the customer. B) purely a matter of marketing message. C) price or value. D) price alone.
A: C) price or value. Rationale: As customers begin to assume that products and services will be of high quality, the competitive differentiator becomes price or value. Technology like the internet makes it easy for customers to shop for lowest price. The market expands from the neighborhood retailer to a global marketplace of eager sellers. For more information, see Module 2, Section B, Chapter 1, Topic 1
Q: A manufacturer is engaging in supplier segmentation in order to create a responsive supply chain. The manufacturer often redesigns products, looking to continuously improve and remain at the forefront of product design. What type of segmentation would work best for the manufacturer if they want to determine which suppliers can best contribute to their product design processes? A) Customization versus standardization B) Lead times C) Supplier capabilities D) Level of innovation
A: D) Level of innovation Rationale: Some suppliers are better partners than others when working to develop innovation in a product's design. Those suppliers who can contribute useful creative input to product designs can be given preferential early involvement in a product design. For more information, see Module 2, Section B, Chapter 1, Topic 3