Download OCR Document - Pearson Higher Education

Chapter 7
Sharpening the Focus: Target Marketing Strategies and
Customer Relationship Management
GENERAL CONCEPT QUESTIONS
Multiple Choice
1. A condition of _____ exists today as a result of people’s diverse interests and
backgrounds that divide them into numerous groups with distinct wants and needs.
a. market aggregation
b. market similitude
c. economic aggregation
d. disintermediation
e. market fragmentation
(e; easy; p. 197)
2. Which
true?
a.
b.
c.
one of the following statements about the steps in the target marketing process is
The first step in the target marketing process is to set marketing objectives.
There are four steps in the target marketing process.
The second step in the target marketing process is the identification of all
segmentation variables.
d. The final step in the target marketing process is positioning.
e. all of the above
(d; moderate; p. 198)
3. _____ is the process of dividing a larger market into smaller pieces based on one or more
meaningful shared characteristics.
a. Acculturation
b. Segmentation
c. Customerization
d. Market aggregation
e. Positioning
(b; easy; p. 198)
211
Part II: Understanding Consumers' Value Needs
4. Recognizing that some people eat cereal because of its nutritional value, that some people
eat cereal because it is easy to prepare, and some eat cereal because it tastes good, is part
of the _____ process.
a. acculturation
b. segmentation
c. customerization
d. market aggregation
e. positioning
(b; easy; p. 198)
5. Age, ethnicity, geographical region, and lifestyle are all examples of _____.
a. segmentation variables
b. positioning strategies
c. synergistic samples
d. homogenous populations
e. sampling heuristics
(a; easy; p. 198)
6. Demographics _____.
a. segments people on the basis of what they do with a product
b. segments people on the basis of when they use a product
c. uses qualitative data to explain why seemingly homogeneous consumers are not
d. segments people on the basis of shared attitudes, opinions, and interests
e. are measurable characteristics such as age and gender
(e; easy; p. 198)
7. A national retailer of uniforms targeted male nurses in a recent advertising campaign. It
used _____ segmentation to define its target market.
a. lifestyle
b. behavioral
c. socioeconomic
d. demographic
e. psychographic
(d; easy; p. 198)
8. Which of the following is NOT an example of a demographic segmentation variable?
a. lifestyle
b. income and social class
c. race and ethnicity
d. gender
e. age
(a; easy; p. 198)
212
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
9. The group of American consumers born between 1977 and 1994 are often called _____.
a. baby busters
b. the silent majority
c. Generation Y
d. tweens
e. Generation X
(c; easy; p. 199)
10. A retailer that wanted to target prospective grooms between the ages of 21 and 40 who
are within six months of their marriage is using _____ segmentation to define its target
market.
a. lifestyle
b. behavioral
c. socioeconomic
d. demographic
e. psychographic
(d; easy; p. 199)
11. The group of American consumers born between 1965 and 1976 are called _____.
a. baby boomers
b. the silent majority
c. Generation Y
d. tweens
e. Generation X
(e; easy; p. 199)
12. Baby boomers _____.
a. were born between 1965 and 1976
b. tend to view their homes as an expression of their individuality rather
material success
c. are important to marketers because of the size of the segment
d. are aged 65 or older
e. none of the above
(c; easy; p. 199)
than
13. The Hispanic American segment is important to marketers because _____.
a. it is growing rapidly
b. Hispanics tend to be brand loyal especially to products made in their country of
origin
c. of the youthful composition of this market segment
d. of the size of the average Hispanic household
e. all of the above
(e; easy; p. 203)
213
Part II: Understanding Consumers' Value Needs
14. The Asian American segment of the population _____.
a. is the largest ethnically-based market segment
b. has been an economically important market segment for almost three decades
c. is not considered to be a significant market segment
d. is the fastest growing minority group in the United States
e. will never be attractive to target marketers
(d; easy; p. 203)
15. What is PRIZM?
a. a method of removing heterogeneous variables from a target market
b. a method of data mining used by marketing managers to implement market
development strategies
c. a database that classified every U.S. zip code according to demographic and
lifestyle characteristics
d. a method of confirming that the chosen target market is representative of the ideal
market segment
e. a positioning strategy used in the introduction of new consumer products
(c; moderate; p. 204)
16. _____ data is useful in understanding why some people who are over 65 lead active lives,
take regular vacations, and eat a healthy diet although others in the same age segment do
not exercise, eat and drink to excess, and refuse to walk more than 5 feet to pick up their
mail.
a. Demographic
b. Geoclustering
c. Ethnocentric
d. Psychographic
e. Socioeconomic
(d; moderate; p. 204)
17. _____ variables segments markets in terms of shared activities, interests, and opinions.
a. Demographic
b. Ethnographic
c. Geodemographic
d. Socioeconomic
e. Psychographic
(e; easy; p. 204)
18. Magazines targeted to people who love to in-line skate, to people who enjoy cooking, and
to people who would prefer a simpler lifestyle use _____ segmentation variables.
a. demographic
b. ethnographic
c. geodemographic
d. socioeconomic
e. pychographic
(e; moderate; p. 204)
214
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
19. What is VALS?
a. a system used for psychographic segmentation
b. a database of people who have purchased similar products
c. a strategy used for implementing geodemographic segmentation
d. a method of confirming that the chosen target market is representative of the ideal
market segment
e. a method of removing heterogeneous variables from a target market
(a; moderate; p. 206)
20. The VALS system categorizes consumers as _____.
a. risk takers or risk aversives
b. leaders or followers
c. innovators, early adopters, late adopters, or laggards
d. principle-oriented, status-oriented, or action-oriented
e. technically-oriented, people-oriented, or task-motivated
(d; moderate; p. 206)
21. _____ segmentation variables classifies consumers on the basis of how they act toward,
feel about, or use a product.
a. Demographic
b. Behavioral
c. Geodemographic
d. Socioeconomic
e. Psychographic
(b; easy; p. 207)
22. The 80/20 rule is most directly related to _____ segmentation.
a. demographic
b. behavioral
c. geodemographic
d. socioeconomic
e. psychographic
(b; moderate; p. 207)
23. The only time many people entertain is during November and December when their
homes are decorated for the holidays. The increase in ads for prepared trays of food to be
served at these functions is directly related to _____ segmentation.
a. sociocultural
b. geodemographic
c. geographic
d. demographic
e. behavioral
(e; easy; p. 207)
215
Part II: Understanding Consumers' Value Needs
24. A viable target market should _____.
a. have homogeneous wants and needs that differ from those of other segments
b. be measurable
c. be large enough to be profitable now and in the future
d. be reachable through marketing communications
e. all of the above
(e; moderate; p. 209)
25. A viable target market should _____.
a. have needs that can adequately be served by the marketer
b. not be reachable by other organizations
c. have the same needs as similar sized groups
d. have enough growth potential to become profitable sometime in the future.
e. all of the above
(a; easy; p. 210)
26. A(n) _____ would probably include customer demographics, location, lifestyle
information, and a description of how frequently the customer buys the product.
a. value analysis
b. customer potential assessment
c. segment profile
d. internal market audit
e. customer guide
(c; easy; p. 210)
27. A company that uses a(n) _____ targeting strategy is appealing to a broad spectrum of
people.
a. fragmented
b. undifferentiated
c. concentrated
d. differentiated
e. customized
(b; easy; p. 210)
28. Why would a company adopt an undifferentiated targeting strategy when there is so
much evidence of the benefits of a differentiated strategy?
a. to more efficiently focus on its CRM strategy
b. to remove the need for disintermediation
c. to move a product to the next stage of its product life cycle
d. to take advantage of economies of scale
e. all of the above
(d; moderate; p. 210)
216
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
29. With a _____ marketing strategy, products and the messages about them are tailored to
the individual customer.
a. fragmented
b. heterogeneous
c. concentrated
d. differentiated
e. customized
(e; easy; p. 212)
30. A former top manager at Mazda was quoted as saying, "Customers want to express their
individuality with the products they buy." His statement reflects a belief that companies
need to develop a _____ marketing strategy;
a. fragmented
b. heterogeneous
c. concentrated
d. differentiated
e. customized
(e; easy; p. 212)
31. _____ means developing a marketing strategy aimed at influencing how a particular
market segment perceives a good or service in comparison to the competition.
a. Concentrated targeting
b. Positioning
c. Benefit segmentation
d. Mass customization
e. Customerization
(b; moderate; p. 212)
32. The first step in developing a positioning strategy is to _____.
a. set the marketing communications budget
b. identify segmentation variables
c. analyze the competitors’ position in the marketplace
d. create a product with a competitive advantage
e. create target markets
(c; moderate; p. 212)
33. Once a _____ is set, marketers must finalize the marketing mix by putting all the pieces
into place.
a. segmentation variable
b. positioning strategy
c. target marketing strategy
d. undifferentiated targeting strategy
e. concentrated targeting strategy
(b; moderate; p. 213)
217
Part II: Understanding Consumers' Value Needs
34. Positioning strategies often try to create a _____ for a good or service, a distinct image
that captures its character and benefits.
a. FAB profile
b. target market
c. brand personality
d. segment profile
e. trade promotion
(c; moderate; p. 213)
35. If someone described Coca-Cola as an all-American, Pepsi-Cola as a young daredevil,
and Dr. Pepper as a nonconformist, s/he would be describing the sodas’ _____.
a. FAB profiles
b. target markets
c. brand personalities
d. segment profiles
e. trade promotions
(c; moderate; p. 213)
36. A perceptual map is used to _____.
a. identify psychographic segments such as people who cheat on their income taxes
or steal from their employers
b. create consumer cross-tabulations for marketing research
c. locate consumers within a primary metropolitan statistical area (PMSA)
d. determine how consumers position products in relation to each other
e. identify at which stage of the targeting process the marketer needs to be
(d; moderate; p. 214)
37. Perceptual maps _____.
a. are created as one stage of the new product development process
b. are often used to predict product success
c. identify consumer shopping preferences in terms of retail and nonretail locations
d. cannot be used in industries where there are oligopolies
e. cannot be created without consumer research
(e; moderate; p. 214)
38. CRM stands for _____.
a. consumer relationship marketing
b. consumer relationship management
c. customer relationship management
d. customer relationship marketing
e. customer relations marketing
(c; easy; p. 215)
218
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
39. Customer relationship management (CRM) deals with how each customer reacts to
elements of the _____.
a. target market strategy
b. segmentation variables
c. perceptual map
d. geodemography
e. marketing mix
(e; moderate; p. 216)
40. The first step in customer relationship management (CRM) for a company is to _____.
a. rank its customers in terms of sales volume
b. train its employees in CRM methodology
c. identify types of transactions and determine which will be abandoned
d. identify customers and get to know them in as much detail as possible
e. determine which aspect of the product will be customized to meet the individual
needs of its customers
(d; moderate; p. 216)
41. Many marketing experts advocate _____ programs that allow companies to talk to
individual customers and adjust elements of the marketing mix to satisfy the specific
needs of each customer.
a. customer relationship management (CRM)
b. interactive communications
c. transactional management
d. B2B marketing
e. management information system (MIS)
(a; moderate; p. 216)
42. Customer relationship management (CRM) programs are also called _____.
a. transactional marketing programs
b. market segmentation strategies
c. one-to-one marketing
d. marketing with a product-orientation
e. undifferentiated marketing
(c; easy; p. 216)
43. According to the writings of Don Peppers and Martha Rogers, there is/are _____ step(s)
in one-to-one marketing.
a. one
b. two
c. three
d. four
e. five
(d; moderate; p. 216)
219
Part II: Understanding Consumers' Value Needs
44. After a marketer has identified customers and gets to know them in as much detail as
possible, then the marketer _____.
a. must interact with the customers and find ways to improve cost efficiency
b. must strive toward effectiveness of the interactions with the customers
c. needs to differentiate these customers in terms of both their needs and their value
to the company
d. needs to customize some aspects of the products or services they offer to each
customer
e. needs to differentiate these customers in terms of only their value to the company
(c; moderate, p. 216)
45. A _____ strategy allows a company to identify its best customers, stay on top of their
needs, and increase their satisfaction.
a. CRM
b. target marketing
c. undifferentiated targeting
d. concentrated targeting
e. differentiated targeting
(a; moderate; p. 216)
46. Which of the following statements about customer relationship management (CRM)
programs is true?
a. The success of a CRM program relies on its use of mass communication channels.
b. CRM programs include any communication channel that allows the customer to
communicate directly with a company.
c. Internet technology is viewed as a barrier to the implementation of CRM
programs.
d. To succeed, all companies should engage in CRM every time they interact with a
customer.
e. Only consumer marketers can benefit from the use of CRM programs.
(b; moderate; p. 217)
47. Which of the following is an example of how customer relationship management (CRM)
programs are used?
a. A customer talks to a service representative about an error in billing.
b. A new computer user calls the computer manufacturer’s hot line at midnight to
see if he needs to buy a printer cable.
c. A dentist sends a postcard to her customers reminding them of their upcoming
appointments.
d. A retailer calls a customer to tell her that the spring line of sandals has arrived at
the store.
e. all of the above
(e; moderate. p. 217)
220
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
48. Which of the following organizations could benefit from the use of customer relationship
management (CRM) programs?
a. the Tennessee Department of Motor Vehicles where drivers’ licenses are issued
b. a veterinarian’s office
c. a department store
d. a construction company
e. all of the above
(e; easy; p. 217)
49. The dentist office calling to remind you of your scheduled appointment for the next day
is an example of _____.
a. CRM
b. target marketing
c. undifferentiated targeting
d. concentrated targeting
e. differentiated targeting
(a; moderate; p. 217)
50. Successful one-to-one marketing is dependent on _____.
a. geodemography
b. segmentation
c. positioning
d. CRM
e. repositioning
(d; easy; p. 217)
51. A CRM strategy allows a company to _____.
a. identify its best customers
b. stay on top of their customers needs
c. increase their customers satisfaction
d. A and B
e. A, B, and C
(e; easy; p. 217)
52. In a nutshell, _____ helps firms communicate with and serve customers by better
understanding their needs.
a. CRM
b. target marketing
c. undifferentiated targeting
d. concentrated targeting
e. differentiated targeting
(a; easy; p. 217)
221
Part II: Understanding Consumers' Value Needs
53. _____ is an effective way to serve new customers who may have been overlooked by
prior marketing efforts.
a. Consumer relationship marketing
b. Consumer relationship management
c. Customer relationship management
d. Customer relationship marketing
e. Customer relations marketing
(c; easy; p. 218)
54. The most important aspect of customer relationship management (CRM) is that it _____.
a. can be implemented using any form of mass communication channel
b. requires organizations to look at customers as partners
c. allows marketers to create consumer wants and needs
d. requires organizations to view their customers as adversaries
e. creates clear win-lose situations
(b; moderate; p. 218)
55. Some areas of focus relating to customer relationship management (CRM) are _____.
a. marketing metrics
b. share of customer
c. lifetime value of the customer
d. customer equity
e. all of the above
(e; easy; p. 219)
56. The most important aspect of _____ is that it presents a new way of looking at how to
effectively compete in the marketplace.
a. consumer relationship marketing
b. consumer relationship management
c. customer relationship management
d. customer relationship marketing
e. customer relations marketing
(c; easy; p. 219)
57. Successful firms have learned a way to compete is by _____.
a. establishing relationships with individual customers on a one-to-one basis
b. communicating through dialogue
c. listening to customer feedback
d. B and C
e. A, B, and C
(e; easy; p. 219)
222
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
58. CRM is used to strengthen relationships between firms and _____.
a. consumers
b. other businesses
c. government agencies
d. not-for-profit organizations
e. all of the above
(e; easy; p. 219)
59. Companies that successfully practice customer relationship management (CRM) measure
success by looking at _____.
a. share of market and net present value of customer over a period of years
b. business potential and industry potential
c. share of customer and lifetime value of the customer
d. a perceptual map and share of voice
e. current future value of the customer and share of market
(c; moderate; p. 219)
60. CRM marketers look at _____.
a. their share of the customers
b. the lifetime value of a customer
c. customer equity
d. focusing on high-value customers
e. all of the above
(e; easy; p. 219)
61. Companies that successfully practice _____ have different goals, use different measures
of success, and look at customers in some different ways.
a. consumer relationship marketing
b. consumer relationship management
c. customer relationship management
d. customer relationship marketing
e. customer relations marketing
(c; easy; p. 219)
62. CRM firms focus on increasing their _____, not share of the market.
a. mass customization
b. perceptual map
c. segment profile
d. usage occasions
e. share of customers
(e; easy; p. 219)
223
Part II: Understanding Consumers' Value Needs
63. CRM firms focus on increasing their share of customer because _____.
a. it is easier and less expensive to keep an existing customer than to get a new
customer
b. it is harder but less expensive to keep an existing customer than to get a new
customer
c. it is usually easier but more expensive to keep an existing customer than to get a
new customer
d. it is always hard and expensive to get new customers
e. customers come and go so quickly
(a; easy; p. 219)
64. Loyal customers _____.
a. are more likely to deliver a greater financial return to the company
b. tend to pay higher prices for the same products and services
c. engage in more positive word of mouth about the company
d. A and B
e. A, B, and C
(e; easy; p. 220)
65. The _____ is/are the potential profit(s) generated by a single customer’s purchase of a
firm’s products over the customer’s lifetime.
a. lifetime value of a customer
b. VALS
c. mass customization
d. share of the customer
e. usage occasions
(a; easy; p. 220)
66. With CRM, a customer’s lifetime value is(are) _____.
a. identified
b. the true goal
c. not an individual transaction
d. A and C
e. A, B, and C
(e; easy; p. 220)
67. Using a customer database a firm can identify its "best customers" in determining _____.
a. how long it has been since the customer last placed an order
b. how often this customer buys a product/service
c. the amount a customer spends on a typical transaction
d. A and B
e. A, B, and C
(d; easy; p. 220)
224
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
68. One of the goals of customer relationship management (CRM) programs is to _____.
a. increase market share
b. develop appropriate responses in transactional marketing situations
c. reduce total communications costs
d. reduce share of customer
e. increase the total profit generated by a customer over his or her lifetime
(e; moderate; p. 220)
69. Which of the following statements about the lifetime value of a customer is true?
a. CRM helps companies identify their customer’s lifetime value.
b. All customers have the same lifetime value.
c. A customer’s lifetime value is easy to calculate.
d. A company can either increase customer share or a customer’s lifetime value but
not both.
e. all of the above
(a; easy; p. 220)
70. Which of the following statements about customer equity is true?
a. With customer equity, a company would put just as much effort in serving
unprofitable customers as it does for profitable ones.
b. Customer equity is an efficient way to reach new customers who may have been
overlooked by prior marketing efforts.
c. With customer equity, all customers are considered equal.
d. Customization is not necessary for successful customer equity.
e. all of the above
(b; moderate; p. 220)
71. _____ is the financial value of customer relationships through the lifetime of the
relationships.
a. Target market
b. VALS
c. Brand personality
d. Customer equity
e. 80/20 rule
(d; easy; p. 220)
72. An increasing number of companies are considering their relationships with customers as
financial assets. Such firms measure success by calculating the value of their _____.
a. target market
b. VALS
c. brand personality
d. customer equity
e. positioning
(d; moderate; p. 220)
225
Part II: Understanding Consumers' Value Needs
73. A goal of CRM is to reap a high return on the investments made in customer relationships
and maximize the value of a firm’s _____.
a. target market
b. VALS
c. brand personality
d. customer equity
e. positioning
(d; moderate; p. 220)
74. To determine _____, firms compare the investments they make in acquiring customers,
retaining customers, and relationship enhancement with the financial return on those
investments.
a. segmentation
b. VALS
c. brand personality
d. customer equity
e. positioning
(d; moderate; p. 220)
75. To determine customer equity, firms _____.
a. analyze the investments they make in acquiring customers
b. analyze the investments they make to retain customers
c. compare relationship enhancements with the financial returns on those
investments
d. A and B
e. A, B, and C
(e; moderate; p. 220)
True/False
76. The direct cause of market fragmentation is the large number of new products introduced
annually.
(F; easy; p. 197)
77. Age, usage rate, love of the outdoors, and political opinions are all examples of
segmentation variables.
(T; easy; p. 197)
78. The members of Generation Y were born between 1965 and 1976.
(F; easy; p. 199)
79. When Apple decided to market color-coordinated computer monitors to women, it
thought it had discovered an important demographic segmentation variable.
(T; easy; p. 199)
226
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
80. A consumer’s national origin cannot be relied on to predict his or her preferences for
specific television shows, foods, apparel, and choice of leisure activities.
(F; moderate; p. 202)
81. Hispanics tend to be brand-loyal, especially to products made in their country of origin.
(T; moderate; p. 203)
82. Hispanic Americans are the fastest-growing minority group in the United States.
(F; moderate; p. 203)
83. A basic assumption of geodemography is that a rolling stone gathers no moss.
(F; moderate; p. 204)
84. Psychographic segments market in terms of shared activities, interests, and opinions.
(T; easy; p. 204)
85. The VALS system is a crucial part of geodemographic segmentation.
(F; moderate; p. 206)
86. The 80/20 rule has a powerful influence on behavioral segmentation.
(T; moderate; p. 207)
87. The target market for movies classified as "chick flicks" is women.
(T; easy; p. 208)
88. A target market is not viable unless the segment is large enough to be profitable now and
in the future.
(T; moderate; p. 210)
89. A manufacturer that sold nothing but tempered glass to car manufacturers and to
companies that produce glass shower enclosures would use an undifferentiated targeting
strategy.
(F; moderate; p. 210)
90. Perceptual maps are a tool for implementing positioning strategies.
(T; easy; p. 214)
91. Customer relationship management (CRM) programs are often called interactive
marketing programs.
(F; moderate; p. 215)
92. Customer relationship management (CRM) programs view customers as partners, not as
adversaries.
(T; easy; p. 216)
227
Part II: Understanding Consumers' Value Needs
93. Customer relationship management (CRM) programs are an efficient way to reach new
customers who may have been overlooked by prior marketing efforts.
(T; easy; p. 218)
94. Marketing experts can see an advantage to the adoption of customer relationship
management (CRM) programs.
(T; easy; p. 218)
95. There are five steps in one-on-one marketing as presented in the writing of Don Peppers
and Martha Rogers.
(F; moderate; p. 216)
96. During the interact stage of one-to-one marketing, companies will initiate more dialogue
with its most valuable customers.
(T; moderate; p. 217)
97. A CRM strategy allows a company to identify its best customers, stay on top of their
needs, and increase their satisfaction.
(T; easy; p. 217)
98. The final stage of customer relationship management (CRM) programs is to identify
customers in terms of both their needs and their value to the company.
(F; moderate; p. 219)
99. The CRM strategy was designed to work only with business-to-business companies with
a very large database of customers.
(F; easy; p. 219)
100. CRM is about communicating with customers and about customers being able to
communicate with a company one to one.
(T; easy; p. 219)
101. The Federal Express Web site tracking a lost package is an example of CRM.
(T; easy; p. 219)
102. Historically, markets have measured success in a product category by their share of the
market.
(T; easy; p. 219)
103. The lifetime value of a customer is the total profit generated by the revenue stream
produced by that customer.
(T; moderate; p. 220)
104. The term share of customer is synonymous with share of market.
(F; moderate; p. 220)
228
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
105. Using a CRM approach, customers must be prioritized and communication customized
accordingly.
(T; easy; p. 220)
Essay
106. What is market fragmentation? Give an example of how it has influenced your life.
Answer:
Market fragmentation refers to how society today has divided people into groups with
diverse interests and diverse backgrounds. Each group has distinctive wants and needs.
Because of this diversity, the same good or service will not appeal to everyone. The
proliferation of cable TV is probably the best example a student can give although there
are certainly others.
(easy; p. 197)
107. You work for a travel agency. Business has been slow, and you have suggested some
promotions targeted to specific market segments. What three demographic segmentation
variables would you recommend using?
Answer:
Students’ answers will vary. Their answers must identify specific demographic-based
segments. Most students will list age, gender, income and social class, race and ethnicity,
and stage of family cycle. Better students will list singles, Generation X members,
divorced, newlyweds, grandparents, Hispanic Americans, etc.
(easy; p. 197)
108. Some marketing texts define generational marketing as the use of marketing programs
designed for the distinct attitudes and consumer behavior of the various generations of
components of the marketplace. How do you think this text would have explained
generalization marketing? Explain your answer.
Answer:
Students should see age as one important demographic segmentation variable. Some will
discuss various aspects of the differences among Generation X, Generation Y, and baby
boomers. Better students should note that it is virtually impossible to separate age from
other behavioral, psychographic, and demographic variables. Therefore, generational
marketing is a theory that would be difficult to use in real world situations.
(moderate; p. 198)
109. How have marketers reacted to the concept that "birds of a feather flock together"?
Answer:
Marketers have developed geodemography—a segmentation technique that combines
demographics and regional marketing. Through geodemography, marketers have proven
229
Part II: Understanding Consumers' Value Needs
that people who live near one another share similar characteristics. They can construct
segments including a number of households with a common pattern of preferences and
know more precisely who will be interested in special offerings.
(moderate; p. 204)
110. You work for a travel agency. Business has been slow, and you have suggested some
promotions targeted to specific market segments. What three psychographic segmentation
variables would you recommend using?
Answer:
Students’ answers will vary. Their answers must be qualitative. Many students will list
shared opinions, interests, and attitudes. Better students will include segments like people
who enjoy fishing, people who like to look at wildlife, vegetarians, people who are
interested in improving their minds, etc.
(moderate; p. 204)
111. What are the four steps in customer relationship management (CRM)?
Answer:
(1) Identify—the first step is to identify customers and get to know them in as much
detail as possible. (2) Differentiate—marketers need to differentiate these customers in
terms of both their needs and the value to the company. (3) Interact—CRM marketers
must interact with customers and find ways to improve cost efficiency and the
effectiveness of the interaction. (4) Customize—marketers need to customize some
aspect of the products they offer to each customer.
(moderate; p. 217)
112. Why has CRM caused marketers to change their focus from share of market to share of
customer? Explain your answer.
Answer:
Historically, marketers have measured success in a product category by their share of
market. As it is easier and less expensive to keep an existing customer than to get a new
customer, CRM firms focus on increasing their share of customer.
(easy; p. 219)
113. What information would a firm maintain in its database to be able to identify its "best
customers"? Explain your answer.
Answer:
One approach a firm may utilize to identify its "best customers" would be keeping a
database of information pertaining to each customer. Using such a database the firm can
perform analyses to determine the value of each customer. Information analyzed would
be the frequency of each purchase, the calendar time between each purchase, and the
financial amount of the purchase. In analyzing this information the firm would have a
230
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
basis to compare all customers to then be able to identify the classification of those
groups as "best customers."
(moderate; p. 220)
114. What does the term lifetime value of a customer mean?
Answer:
The lifetime value of a customer is the potential profit generated by a single customer’s
purchase of a firm’s products over the customer’s lifetime. A firm’s profitability and
long-term success are going to be far greater if it develops long-term relationships with
its customers so that those customers buy from the firm again and again. Costs to the firm
will be higher and profits lower if each customer purchase is a first-time sale.
(easy; p. 220)
115. What does the term customer equity mean?
Answer:
Customer equity is the financial value of a customer to a firm. This financial value is
based on purchases throughout the lifetime of the relationship between the firm and the
customer.
(easy; p. 220)
APPLICATION QUESTIONS
Multiple Choice
116. Some beer drinkers choose their beer because of its great taste. Others like to drink beers
to relax but don’t like the bloated feeling beer sometimes gives them. An ad campaign for
a beer that showed the beer had both a great taste and was less filling would be one way
to overcome problems associated with _____.
a. market aggregation
b. market similitude
c. economic aggregation
d. disintermediation
e. market fragmentation
(e; moderate; p. 197)
231
Part II: Understanding Consumers' Value Needs
117. Some people want healthy cereal that will help them lose weight or possibly prevent
certain kinds of cancer. Some want presweetened cereal. Some want fruits and nuts in
their cereal. Some people want whole-wheat cereal while others want a rice cereal. There
are some who like hot cereal and others who like to eat their cereal right of the box. The
diversity of consumers for cereal is an example of _____.
a. market aggregation
b. market similitude
c. economic aggregation
d. disintermediation
e. market fragmentation
(e; moderate; p. 197)
118. Weekly Reader is a newspaper designed to keep school children informed of what is
going on in their country and their world. It has 16 different formats geared to the reading
capabilities of children from pre-kindergarten through high school. It uses _____
segmentation to define its target markets.
a. lifestyle
b. behavioral
c. socioeconomic
d. demographic
e. psychographic
(d; easy; p. 198)
119. When many men in the baby boomer segment started getting gray hair, they were
reluctant to use hair dyes made for women even though men were just as eager as women
to fight the aging process. As a result, hair care product manufacturers introduced hair
dying systems for men to use on their head and their facial hair. The hair care product
manufacturers used _____ segmentation to define its target markets.
a. lifestyle
b. behavioral
c. socioeconomic
d. demographic
e. psychographic
(d; easy; p. 198)
120. If a company wanted to send e-mail to African American professional managers and
business owners to promote its new employment service, it could buy a list of e-mail
addresses of people who have visited BlackEnterprise.com and who have given
permission for the marketing of their names and e-mail addresses. This company would
be using _____ segmentation variables.
a. psychographic
b. demographic
c. geodemographic
d. ethnocentric
e. behavioral
(b; easy; p.198)
232
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
121. Campbell’s found its canned nacho cheese sauce was too hot for Americans in the East
and not hot enough for those in the West and the Southwest. As a result, Campbell’s
plants in Texas and California produce a hotter nacho cheese sauce than that produced in
its other plants. Campbell’s is using _____ segmentation to satisfy these different
markets.
a. geographic
b. consumerist
c. psychographic
d. lifestyle
e. usage
(a; easy; p. 203)
122. To market Suave shampoo, Unilever used PRIZM to identify neighborhoods with high
concentrations of young working women. These women responded best to advertising
messages that Suave is inexpensive, yet will make their hair "look like they spend a
fortune on it." What segmentation tool did Unilever use in this example?
a. psychographics
b. geodemography
c. the hierarchy of needs
d. projective techniques
e. ethnography
(b; moderate; p. 204)
123. People who are regular visitors to SciFi.com (a Web site maintained by the science
fiction cable network) and those who are regular visitors to BHG.com (a Web site
maintained by the producers of BHG-TV and the publishers of Better Homes and
Gardens magazine) belong to different _____ segments.
a. demographic
b. ethnographic
c. geodemographic
d. socioeconomic
e. psychographic
(e; easy; p. 204)
124. Airlines have developed frequent-flyer programs to encourage passengers to use the same
airlines repeatedly. These programs and other similar ones use _____ segmentation to
target their markets.
a. demographic
b. behavioral
c. geodemographic
d. socioeconomic
e. psychographic
(b; easy; p. 207)
233
Part II: Understanding Consumers' Value Needs
125. Starting in February and ending sometime in late April, department stores promote the
fact they stock a wide range of formal attire to wear to high school proms. The dresses
and tuxedoes are available year-round, but because most proms are held in the spring that
is when the heaviest promotion of these products occur. This spring promotion to high
school students is based on usage occasion and uses both _____ segmentation.
a. socioeconomic and psychographic
b. psychographic and demographic
c. geodemographic and sociocultural
d. demographic and behavioral
e. geographic and demographic
(d; moderate; p. 207)
126. The Wright Bros. Collection is a catalog retailer that sells clothing and collectibles to
aviation enthusiasts. Its _____ might be men and women between the ages of 25 and 55
who are risk takers. They belong to organizations like the American Legion, the VFW,
and the National Rifle Association of America. They are either pilots themselves or have
close ties to a pilot. They prefer camping to taking a luxury cruise. They annually spend
$900 on items purchased from nonstore retailers.
a. value analysis
b. customer potential assessment
c. segment profile
d. internal market audit
e. customer guide
(c; moderate; p. 209)
127. Recently engaged couples who visit the De Beer’s Web site can choose from a variety of
diamonds and settings to create their own individualized ring. All questions are answered
at the Web site as the couple selects a ring that is uniquely theirs and within their budget.
De Beer uses a(n) _____ program and hopes that the next time users of the site are
interested in buying jewelry, they will return to the De Beer’s Web site.
a. customer relationship management (CRM)
b. intersituational communications
c. transactional management
d. B2B marketing
e. management information system (MIS)
(a; easy; p. 215)
128. Writers Don Pepper and Martha Rogers redefined the term customer relationship
management (CRM) to _____.
a. consumer relationship marketing
b. consumer relationship management
c. managing customer marketing
d. customer relationship marketing
e. managing customer relationships
(e; moderate; p. 216)
234
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
129. The airline industry can benefit from the implementation of CRM by _____.
a. automating crucial information
b. reducing phone call volume
c. identifying flying patterns
d. identifying favored destinations
e. all of the above
(e; easy; p. 218)
130. Which of the following would NOT be a benefit to the Dow Company in its efforts to
implement CRM strategies using a newly developed Web-based interface,
MyAccount@Dow, within its business-to-business practices?
a. Customers have the ability to enter new orders.
b. Customers have the ability to be harassed by unhappy Dow employees.
c. Customers have the ability to check on the status of old orders.
d. Customers have the ability to pay invoices electronically.
e. Customers have the ability to collaborate with others throughout the system.
(b; easy; p. 219)
131. The average collectors of Thomas Kinkade collectible miniatures will buy four new ones
each year. The collectibles are available at a number of different retail locations and from
several different catalog retailers. To ensure she gets a greater ______, the owner of The
Pine Door Gift Shop sends her customers, who are Thomas Kinkade collectors, a
postcard every time the store adds a new one to her store’s inventory.
a. share of communication
b. synergistic feedback
c. customer allocation
d. share of customer
e. economic share
(d; moderate; p. 219)
132. The average collectors of Thomas Kinkade collectible miniatures will buy four new ones
each year. The collectibles are available at a number of different retail locations and from
several different catalog retailers. As part of her _____ program, the owner of The Pine
Door Gift Shop sends her customers, who are Thomas Kinkade collectors, a postcard
every time the store adds a new one to her store’s inventory.
a. transactional marketing programs
b. product fragmentation strategy
c. customer equity
d. marketing with a product-orientation
e. undifferentiated marketing
(c; moderate; p. 220)
235
Part II: Understanding Consumers' Value Needs
133. The owner of a pet grooming salon is striving to determine the customer equity of a
customer relating to the purchase of pet products and services offered by the salon.
Which of the following would be a step the owner of this pet grooming salon would
complete to determine this information?
a. Compare investments made by the salon owner in acquiring the customer to the
total amount of all financial sales made by the customer.
b. Compare investments made by the salon owner to retain this customer to the total
amount of taxes the salon owner pays.
c. Ask the customer if s/he is planning on getting any new pets.
d. Investigate how many other pet grooming salons are within five miles of this
salon to determine the likelihood of this pet owner returning to this salon.
e. Determine the age of the pet to estimate how much longer this customer may need
the services of the salon.
(a; easy; p. 220)
134. A bank utilizing CRM systems is generating customer profiles to determine its high-value
customers. Which of the following aspects of the probability of each customer would the
bank consider valuable information to assess its high-volume customers?
a. the risk of losing this customer
b. the interest each customer may have in buying new financial products
c. the current value of this customer to the bank
d. a and b
e. a, b, and c
(e; moderate; p. 220)
135. A building supply company has many high-volume as well as low-volume customers.
Which of the following would be an inefficient cost means of communication for this
supply company to implement regarding its low-volume customers?
a. Every November, send each customer a new calendar that has the phone number
of the building supply company printed on the cover.
b. Once or twice a year, mail a new product catalog to each customer.
c. Every few months, have a customer service representative from the building
supply company call each customer.
d. Have a sales representative make a personal one-on-one appointment with each
and every low-volume customer at least twice a month.
e. Give each low-volume customer the company Web address so this customer can
check building supply products being sold by this company.
(d; easy; p. 220)
236
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
Short Answer
136. A new family just moved into the old house on the corner. Three generations of family
members are sharing this big house. Different styles of music can be heard coming from
the windows of this house. The neighbors can always tell which generation member is
enjoying his/her music. What is market fragmentation, and how it is being implemented?
Answer:
Market fragmentation occurs when people’s diverse interests and backgrounds divide
them into numerous different groups with distinct needs and wants. Because of this
diversity, the same good or service will not appeal to everyone. Within this family,
members of different age groups may be more familiar with one style or sound of music
than someone from another age group.
(moderate; p. 197)
137. How would you relate ordering a pizza pie, half all cheese and the other half extra cheese
with mushroom to market segmentation? Explain your answer.
Answer:
Market segmentation is the process of dividing a larger market into smaller pieces based
on one or more meaningful, shared characteristics. Marketers can take one product and
make changes to it to please different customers. Many people like to eat pizza. Some
people may like different toppings on their piece of pizza. Therefore, the big pizza can be
topped with more than one ingredient.
(moderate; p. 197)
138. A store selling ice cream offers more than thirty different flavors of their product. If a
customer so wishes, different flavors of ice cream can be mixed on one cone. How has
this ice cream store implemented marketing segmentation? Explain your answer.
Answer:
This store is selling ice cream in a variety of flavors. The choices of flavors may be
favorites of different customers. Therefore the store will have such flavors as vanilla,
chocolate and strawberry, etc. to be able to meet the desired taste choices of each
customer. The store has segmented its supply of ice cream to meet the different wants and
needs of ice cream shoppers.
(easy. p. 197)
237
Part II: Understanding Consumers' Value Needs
139. A new family just moved into the old house on the corner. Three generations of family
members are sharing this big house. Different styles of music can be heard coming from
the windows of this house. The neighbors can always tell which generation member is
enjoying his/her music. Explain demographics, and how the style of music being heard
by the neighbors could be an indication as to which family member is enjoying his/her
favorite recordings.
Answer:
Demographics are measurable characteristics such as gender and age. Within this family,
the gender of the family member may not be distinguishable by the sound or style of
music being heard by the neighbors, but the age of the family member may be detectable
if the neighbors themselves are familiar with what style of music is generally appealing to
different age groups.
(easy; p. 198)
140. Ads for IBMs VoiceType software, which allows users to control the PC by voice,
featured Curtis Mayfield, who was a Grammy Award winning soul singer and a
quadriplegic. What demographic dimensions marketers were utilizing within this ad?
Explain your answer.
Answer:
The demographic dimensions that marketers usually look at are age, gender, family
structure, income and social class, race and ethnicity, and geography. Within this ad
demographics noted are: gender and race. Physical abilities could also be segmented.
(easy; p. 198)
141. A marketer is mentioning buzz words such as Generation X, Generation Y, and baby
boomers, what marketing segmentation is the focus of this marketer’s thoughts? Explain
your answer.
Answer:
The buzz words Generation X, Generation Y and baby boomers relate to the calendar
years that people were born. Generation X groups people born between 1965 and 1976.
Generation Y members were born between 1977 and 1994. Baby boomers were born
between 1946 and 1964. The marketer is focusing on the age segmentation.
(easy; p. 199)
142. You see a former high school classmate. This person is so excited to show you pictures of
his/her new twin babies. The picture shows two babies each wearing identical outfits,
except one outfit is pink and the other outfit is blue. Without being told, how can you tell
the gender of these two babies? Explain your answer.
Answer:
Gender segmentation is common with some products. Segmenting by sex starts at an
early age with the generalization that baby boys wear blue and baby girls wear pink.
(easy; p. 200)
238
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
143. A famous vacation resort started marketing new commercials. Within the ads a variety of
activities were seen. For example, swimming pools appropriate for babies, swimmer and
divers, one restaurant specializing in fast food and another catering to individuals
preferring a gourmet menu. This resort wants the entire family to feel comfortable
vacationing at this location. How are the marketers addressing family structure
segmentation? Explain your response.
Answer:
Family needs change over time. As family members age and move into new life stages,
different product categories ascend and descend in importance. A couple with very young
children may be drawn to the baby pool so their children can be safe in the pool and play
with other children within their age group. A couple with no children may like to swim
and dive, and have no need or wants to be near the baby pool at this resort. The culinary
tastes and desires of the family with children may be perfect for the fast food restaurant.
The childless couple may like to spend hours enjoying a gourmet meal.
(moderate; p. 201)
144. A recent fashion trend featured clothing made with real gold, including pinstriped suits
selling from $10,000 to $20,000. At the same time discount stores such as Target have a
large and prosperous clothing line. What segmentation are these marketers addressing?
Explain your answer.
Answer:
These marketers are addressing the income level of consumers. Each income level
segmentation of consumers determines its financial buying power.
(easy; p. 201)
145. A new marketing segmentation buzzword is "metrosexual." What are some
characteristics of someone who could be classified within this segmentation?
Answer:
A metrosexual is a man who is heterosexual, sensitive, educated, and an urban dweller
who is in touch with his feminine side. Metrosexuals may have a standing appointment
for a weekly manicure, have their hair done by a stylist instead of a barber, love to shop,
like jewelry, and have a bathroom counter filled with male-targeted grooming products
such as moisturizers.
(moderate; p. 201)
146. In the Middle East, rules about the mixing of the sexes and the consumption of alcohol
are quite strict. Chili’s Grill & Bar is known simply as Chili’s, and the chain offers a
midnight buffet during Ramadan season, when Muslims are required to fast from dawn to
dusk. How would you identify and explain the marketing segmentation?.
Answer:
Responses from students may vary with this question. The rationale for the question is to
determine if students understand that each segmentation is important, and can be mixed
239
Part II: Understanding Consumers' Value Needs
as a need to know by marketers. For example, within this question scenario, gender,
social culture, race and ethnicity, and geographic location could be mentioned by students
within their responses.
(moderate; p. 202)
147. Tropicana Essentials Healthy Heart targets consumers who like orange juice and who
also want extra vitamins and no sodium. What is the concept of behavioral segmentation,
and then explain what categories may be addressed with this product by Tropicana?
Answer:
Behavioral segmentation categorizes consumers on the basis of how they act toward, feel
about, or use a product. Tropicana Essentials Healthy Heart targets consumers who want
the healthy benefits of added vitamins and no sodium added to their OJ. These consumers
want the juice and feel better knowing that the juice itself is good and good for them. And
knowing there is no added sodium, which is something that these consumers do not want,
especially in their orange juice.
(moderate; p. 207)
148. A large chain amusement park sells tickets at its main gate for guests who are visiting the
park for just that one day. The park also sells tickets that can be reused several times,
however only on weekdays during the recreation season while the park is open. What
market segmentation is being implemented by the amusement park in selling the two
different types of tickets?
Answer:
The amusement park is categorizing its guests into two potential groups. The first group
consists of guests who will only be attending the park for one specific day. This being the
day the ticket is purchased. The second group consists of guests who will be visiting the
park on more than one occasion and the specific day of these visits may not be known at
the time of the purchase of this ticket. However, each guest can only use these tickets on
weekdays, never a weekend. The segmentation being implemented by the amusement
park is usage occasions.
(moderate; p. 207)
149. The cosmetics giant L’Oreal has the resources to offer several product lines at a variety
of prices. It targets the luxury market with their brand Helena Rubinstein, while less
expensive offerings such as Elseve is targeted to large department stores and discounters.
Is this practice by this cosmetic company a differentiated targeting strategy or an
undifferentiated targeting strategy? Explain your answer.
Answer:
This company is implementing a differentiated targeting strategy. This practice is when
one or more products are offered for each of several customer groupings with different
product needs. A differentiated strategy is called for when consumers choose among
brands that are well known in which each has a distinctive image in the marketplace and
in which it is possible to identify one or more segments that do have distinct needs for
240
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
these different types of products. This company is not following the undifferentiated
targeting strategy, meaning the company would develop products that would be marketed
to all groups no matter what their specific needs may be.
(moderate; p. 210)
150. How does the computer company Dell use mass customization to meet the needs of their
customers? Explain the concept.
Answer:
Mass customization is when a company modifies its products or services to meet the
needs of its customers. The computer company Dell does this by offering customized
computer products over the Internet. Users can create their own computers, everything
from personal computers to networking systems.
(moderate, p. 212)
151. Over time a firm may find it needs to change which segment it targets or even redo a
product’s position to respond to marketplace changes. This makeover strategy is called
repositioning. Select any major, well-known firm. How has it repositioned its products or
services in response to marketplace changes? Explain your answer.
Answer:
Responses from each student will vary with this question. The rationale for this question
is to require each student to be tested on the understanding of the repositioning concept
and then be able to apply this practice to a product or business.
(moderate; p. 213)
152. Explain the philosophy of customer relationship management (CRM). What is an
example of one company that has implemented this style of business? Explain your
answer.
Answer:
Customer relationship management (CRM) are programs that allow companies to talk to
individual customers and adjust elements of their marketing programs in light of how
each customer reacts to elements of the marketing mix. Student responses identifying a
company that has implemented this practice will vary. The key factors that should be
presented within each example given is in the explanation as to how the company has
really implemented and is enforcing the concept of CRM.
(moderate; p. 215)
153. What is the dependency of the success of one-to-one marketing on CRM?
Answer:
One-on-one marketing is the concept of the company identifying and then addressing the
specific needs and demands of its customers. The key to doing this is the implementation
of CRM, customer relationship management.
(easy; p. 216)
241
Part II: Understanding Consumers' Value Needs
154. What is the rationale for the financial services firms Salomon Smith Barney and Fidelity
Investments to implement the marketing strategy CRM? Explain your answer.
Answer:
CRM is customer relationship management. This concept deals with the interaction of a
firm with its customers. The two mentioned financial services firms are in contact with
customers. Each customer may have different reasons for dealing with these companies.
In the implementation of CRM the firms are able to identify and then address the needs
and demands of the customers.
(easy; p. 217)
155. What are two ways that the airline industry can benefit from the implementation of CRM
systems? Explain your answer.
Answer:
The responses from students will vary. The rationale for this question is to test the
understanding each student has to the variety of ways a firm can implement CRM. The
textbook addresses the airline industry usage of CRM as follows: The airline industry,
rocked by financial problems the past few years, is also concerned about customer
relations and has invested heavily in CRM systems. These systems help flyers by
automating crucial information and reducing phone call volume. CRM also helps identify
flying patterns, favored destinations, and loyal users so that extra perks can be
implemented.
(moderate; p. 218)
156. Mail order catalog companies send their catalogs to many homes across the country. How
would you relate the concept of CRM along with repositioning these companies
concerning the fact that the average Hispanic household gets 20 pieces of direct mail
annually compared to the 300 pieces for non-Hispanic households? Explain your answer.
Answer:
CRM programs allow companies to interact with customers and adjust elements of their
marketing programs in light of how each customer reacts to elements of the marketing
mix. Repositioning occurs when a firm may change a segment it targets or even may redo
a product’s position to respond to marketplace changes. Mail order catalog companies
may redo their product, the catalog position may start to mail more catalogs to Hispanic
households as is being done with non-Hispanic households.
(moderate; p. 219)
242
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
157. The Dow Company created a company-wide technology based system called
MyAccount@Dow. This system lets Dow customers enter new orders, check on the
status of old orders, pay invoices electronically, and collaborate with others throughout
the system. How have the actions of Dow interacted with an aspect of CRM and the
concept of business-to-business?
Answer:
The Dow Company is strengthening its business-to-business relations with its customers
by offering its customers the ability to be able to electronically place new orders, check
on the status of old orders, pay invoices electronically, and collaborate with others
throughout the system. Dow has given each customer the ability to address their
individual wants and needs with this company. Dow with its database of information can
address these customers’ wants and needs.
(moderate; p. 219)
158. The Dow Company created a company-wide technology based system called
MyAccount@Dow. This system lets Dow customers enter new orders, check on the
status of old orders, pay invoices electronically, and collaborate with others throughout
the system. How can Dow use the information obtained from all transactions mentioned
to determine the business-to-business customers Dow categorizes as "best customers"?
Explain your answer.
Answer:
The system MyAccount@Dow lets Dow customers enter new orders, check on the status
of old orders, pay invoices electronically, and collaborate with others throughout the
system. Information obtained via these transactions will allow Dow to track the recency
of each purchase, the frequency of each purchase, and the monetary value of each
purchase concerning each customer. This information will allow Dow to then determine
its "best customers."
(moderate; p. 219)
159. Your local town has four different video stores all renting movies and computer games.
One of these video stores is implementing the CRM philosophy of focusing on its share
of customer. What strategy might you suggest that will help to sway all residents of the
town to rent items from only this one store? Explain your answer.
Answer:
It is easier and less expensive for a company to keep an existing customer than to get a
new customer. An aspect of CRM focuses on increasing the share of customer, meaning
that this customer utilizes only one company or product instead of several. Suggestions as
to how the store may implement this strategy will vary. The rationale for this question is
to test the understanding of working with each customer to build loyalty. The example
given within the text to implement this strategy by a store is to offer a discount in the
purchase of more than one item.
(moderate; p. 219)
243
Part II: Understanding Consumers' Value Needs
160. With CRM, a customer’s lifetime value is identified and is the true goal, not an individual
transaction. Identify any business. How does this business meet this rationale in relation
to its customers? Explain your answer.
Answer:
The business identified by each student will vary. The rationale for this question is to test
the understanding of how a loyal customer can be financially profitable for a company.
The textbook elaborates in the following way addressing this theory: A firm’s
profitability and long-term success will be far greater if it develops long-term
relationships with its customers so that those customers buy from this firm again and
again. Costs will be far higher and profits lower if each customer purchase is a first-time
sale.
(moderate, p. 220)
161. Identify any product or service. How can a marketer calculate the lifetime value of a
customer relating to the purchase of this product or service? Explain your answer.
Answer:
The product or service mentioned by each student will vary. The rationale for this
question is to test the understanding of the steps involved in the determination of the
lifetime value of a customer. The textbook presents the following: A firm must first
estimate a customer’s future purchases across all products from the firm over the next
calendar years. The goal is to try to figure out what profit the company could make from
the customer in the future. The lifetime value of the customer would be the total profit
generated from purchases from this customer.
(moderate; p. 220)
162. Identify any product or service. How can a marketer calculate the customer equity of a
customer relating to the purchase of this product or service? Explain your answer.
Answer:
The product or service mentioned by each student will vary. The rationale for this
question is to test the understanding of the steps involved in the determination of the
customer equity of a customer. The textbook presents the following: Determining
customer equity is calculating the financial value of customer relationships throughout
the lifetime of the relationship between the customer and the firm’s product/service. To
do this, firms compare the investments they make in acquiring customers, retaining
customers, and relationship enhancement with the financial return on those investments.
(moderate; p.220)
244
Chapter 7: Sharpening the Focus: Target Marketing Strategies and Customer Relationship Management
163. Banks utilizing CRM systems generate a profile of each customer based on factors such
as value, risk, attrition, and interest in buying new financial products. What aspect of the
CRM system are banks implementing in completing these profiles? Explain your answer.
Answer:
Information analyzed by banks in implementing a CRM system for each customer to
determine the value, risk, attrition, and interest each customer may have in buying new
financial products will enable the banks to focus on high-value customers.
(moderate; p. 220)
164. A dentist has two new patients. One patient is single and has no children. The other
patient is a parent with six children. All children are between the ages of 5 and 12. What
factors can the dentist utilize from the demographics mentioned to determine the value of
each customer? Explain your answer.
Answer:
A profile for each customer to determine the value, risk, attrition, and interest each
customer may have in utilizing the services of the dentist will enable the dentist to
determine the value of each customer. The demographics of the two new patients would
lead the dentist to believe that he may have more customers with the parent who has
many children who may all need dental work. However, this does not necessarily mean
that the parent and six children will utilize the services of the dentist as often as the
patient who is single.
(moderate; p. 220)
165. A firm has categorized its customers into two groups. Each customer has been identified
as being either a high-volume customer or a low-volume customer. Why would a firm
want to implement different styles of communication for each group of customers?
Identify one means of communication that would be best suited to be utilized by a firm
for each of these customer groups. Explain your answer.
Answer:
A firm should look at the cost and time factors involved in the communication with
customers within each group. The high-volume customers may require, for example, a
personal sales representative to be in constant contact with the customer. This may be an
expensive means of communication that can have an effect upon the overall profits
generated by this customer. However, without such communication the firm may lose the
customer to a competitor. The low-volume customer may be adequately serviced by
mailed literature or occasional verbal communication via the telephone.
(moderate; p. 220)
245