Marketing Management, 15e (Kotler)
Chapter 5 Creating Long-Term Loyalty Relationships
1) Which of the following is true for the modern company organization chart?
A) Frontline employees are less important than top management.
B) Customers are at the top of the pyramid.
C) Top management is at the top of the pyramid.
D) Customers are less important than middle management.
E) Frontline employees are at the top of the pyramid.
2) In the modern customer-oriented organizational chart, which of the following is considered to
be at the top of the organizational pyramid?
A) sales
B) top management
C) front-line people
D) customers
E) middle management
3) In a modern customer-oriented organization chart, the ________ of an organization
immediately follow the customer segment.
A) top management
B) marketing department
C) middle management
D) frontline people
E) lower management
4) ________ is the difference between the prospective customer’s evaluation of all benefits and
all costs of an offering and the perceived alternatives.
A) Perceived usefulness
B) Failure avoidance rate
C) Total customer benefit
D) Customer-perceived value
E) Competitors’ market share rate
5) When a consumer considers a product or service, he or she will choose whichever product or
service delivers the highest ________.
A) customer-perceived value
B) customer-perceived cost
C) customer profitability analysis
D) customer equity
E) customer lifetime value
6) ________ is the perceived monetary value of the bundle of economic, functional, and
psychological benefits customers expect from a given market offering.
A) Total customer cost
B) Total customer benefit
C) Total benefits of ownership
D) Value proposition
E) Value delivery system
7) The bundle of costs customers expect to incur in evaluating, obtaining, using, and disposing of
a market offering is called the ________.
A) activity-based cost
B) customer profitability analysis
C) total customer cost
D) product life-cycle cost
E) direct product profitability
8) Which of the following is true for customer-perceived value?
A) It is the perceived monetary value of the bundle of economic, functional, and psychological
benefits customers expect from a product.
B) It is the difference between the prospective customer’s evaluation of all the benefits and all the
costs of an offering and the perceived alternatives.
C) It is the perceived bundle of costs customers expect to incur in evaluating, obtaining, using,
and disposing of the given market offering.
D) It is the net present value of the stream of future profits expected over the customer’s lifetime
purchases.
E) It is the process of investigating the hierarchy of attributes consumers examine in choosing a
brand if they use phased decision strategies.
9) Which of the following is the first step in customer value analysis?
A) Examine how customers in a specific segment rate the company’s performance.
B) Assess the company’s and competitors’ performances on the different customer values against
their rated importance.
C) Identify the major attributes and benefits that customers value.
D) Monitor customer values over time.
E) Assess the quantitative importance of the different attributes and benefits.
10) The final step of customer value analysis is to ________.
A) identify the major attributes and benefits that customers value
B) assess the company’s and competitors’ performances on the different customer values against
their rated importance
C) examine how customers in a specific segment rate the company’s performance
D) monitor customer values over time
E) assess the quantitative importance of the different attributes and benefits
11) Cell phone manufacturer LZT has to choose between two options for sourcing parts: Japan-
based Keiko Inc. and US-based Global Tech. How can Keiko reduce the total customer cost for
LZT?
A) by absorbing some risk by offering a warranty
B) by improving the functional aspects of the products
C) by augmenting the psychological benefits of the products
D) by training service personnel to improve their skills
E) by investing in brand building for the products
12) ________ can be defined as a deeply held commitment to rebuy or repatronize a preferred
product or service in the future despite situational influences and marketing efforts having the
potential to cause switching behavior.
A) Value proposition
B) Loyalty
C) Satisfaction
D) Respect
E) Customer value
13) TBS Bikes has recently introduced a series of bikes called Surami. The core positioning of
TBS Bikes is “speed.” Surami is a five-gear bike, and apart from speed, the company promises to
include other features such as safety, good performance, and pollution control features. This
describes the ________ of the bike.
A) total customer cost
B) customer-perceived value
C) value-delivery system
D) value proposition
E) total customer benefit
14) A company’s ________ includes all the experiences the customer will have on the way to
obtaining and using the offering.
A) value proposition
B) value delivery system
C) customer-value analysis
D) total customer benefit
E) total customer cost
15) Sammy’s is a fast food chain that offers burgers, sandwiches, and shakes. It focuses its
marketing efforts on all the experiences the customers will have on the way to obtaining their
food order and eating it. Hence, Sammy’s is focusing its marketing efforts on its ________
system.
A) horizontal marketing
B) cost versus benefit
C) consumption
D) marketing channel
E) value delivery
16) Total customer satisfaction is measured based on the relationship of ________.
A) expected value and total customer benefit
B) perceived performance and expectation
C) advertised outcomes and real outcomes
D) past experience and present experience
E) customer attitude and salesperson’s attitude
17) Which of the following is true for customer satisfaction?
A) Satisfaction is a deeply held commitment to rebuy or repatronize a preferred product despite
situational influences.
B) Consumers often form more favorable perceptions of a product with a brand that is new.
C) The ultimate goal of a customer-centered firm is to create high customer satisfaction.
D) Only increased customer satisfaction can help a company increase its profits.
E) Greater customer satisfaction has also been linked to higher returns and lower risk in the stock
market.
18) ________ can track customer satisfaction directly, measure repurchase intention and also
gauge a consumer’s willingness to recommend the company and brand to others.
A) Periodic surveys
B) Mystery shoppers
C) Customer loss rates
D) Customer focus statements
E) Sales summary reports
19) Field Grocery wants to learn the strengths and weaknesses in customer service at all the Field
Grocery stores. Which of the following methods can it use for this?
A) group buyers
B) buyer brokers
C) mystery shoppers
D) personal shoppers
E) buying agents
20) Of customers who register a complaint, ________.
A) all will do business with the company again because they are unwilling to dedicate the effort
required to find another vendor
B) none will do business with the company again
C) customers whose complaints are satisfactorily resolved are more likely to provide publicity
than those who are dissatisfied
D) the speed of resolution has no impact on the likelihood of repeat business
E) some will do business with the company again if their complaint is resolved
21) Which of the following is the best method of recovering customer goodwill?
A) sending service people to conduct door-to-door surveys
B) contacting the complaining customer as quickly as possible
C) identifying prospective customers from the customer database
D) customizing products according to individual customer need
E) defining and measuring the customer retention rate
22) ________ is the totality of features and characteristics of a product or service that bear on its
ability to satisfy stated or implied needs.
A) Performance
B) Value
C) Quality
D) Customer retention
E) Customer loyalty
23) When two brands of the same basic product deliver their respective promised quality, they
are delivering ________.
A) performance quality
B) conformance quality
C) unique quality
D) accuracy quality
E) customer support
24) Rade and Talion are competitors in the business of manufacturing wristwatches. While Rade
promises to deliver design and quality to its customers, Talion promises to deliver durability and
cost effectiveness. When both these companies deliver their respective promised qualities, they
are delivering ________.
A) performance quality
B) customer support
C) unique quality
D) accuracy quality
E) conformance quality
25) Justin conducts a survey on behalf of his firm, Komatsu. In the survey, he asks prospects to
rate Caterpillar and Komatsu branded tractors on their performance on attributes that are
important to the customer. In which step in the customer value analysis is Justin engaged?
A) Examine how customers in a specific segment rate the company’s performance against a
specific major competitor on an individual attribute or benefit basis.
B) Assess the quantitative importance of the different attributes and benefits.
C) Identify the major attributes and benefits customers value.
D) Monitor customer values over time.
E) Assess the company’s and competitors’ performances on the different customer values against
their rated importance.
26) The Net Promoter Score is calculated by subtracting ________ from ________.
A) promoters; detractors
B) detractors; promoters
C) detractors; passively satisfied customers
D) passively satisfied customers; detractors
E) passively satisfied customers; promoters
27) Customer-perceived value is based on the difference between benefits the customer gets and
costs he or she assumes for different choices.
28) One of the ways a company like Caterpillar could increase the customer-perceived value of
an offer, relative to a competitor like Komatsu, is to increase the total customer benefit by
improving psychological benefits of its product, services, people, and/or image.
29) Total customer cost consists of only the non-monetary costs in evaluating, obtaining, using,
and disposing of the given market offering.
30) Customer-perceived value is the perceived monetary value of all the purchases a customer
makes on an annual basis.
31) A seller who is at a disadvantage has two alternatives: decrease total customer benefit or
increase total customer cost.
32) The value proposition is stated in the price of a product and readily recognized by the
average consumer.
33) The value delivery system includes all the experiences the customer will have on the way to
obtaining and using the offering.
34) The value proposition is also known as the core positioning of the offering.
35) Loyalty is a person’s feelings of pleasure or disappointment that result from comparing a
product’s perceived performance to expectations.
36) Customer satisfaction is the only way by which a firm can increase its profitability.
37) Consumers’ expectations result exclusively from past buying experiences.
38) The best thing a company can do in the face of company mistakes is to discourage the
customer from complaining.
39) Quality is the totality of features and characteristics of a product or service that bear on its
ability to satisfy stated or implied needs.
40) Conformance quality and performance quality are identical in the marketing sense.
41) Two products with very different performance qualities can have the same conformance
quality if both products deliver their respective promised quality.
42) Compare and contrast the typical traditional organization chart for an organization against
the modern customer-oriented organization chart.
43) Explain customer-perceived value.
44) What are the steps in a customer value analysis?
45) Explain total customer satisfaction.
46) What are the measurement techniques for monitoring satisfaction?
47) Cell phone manufacturer LZT has to choose between two options for sourcing parts: Japan-
based Keiko Inc. and US-based Global Tech. Though Keiko’s products are priced lower than
Global’s, the non-monetary costs of doing business with Keiko may lead LZT to choose Global
Tech. What can Keiko do to obtain LZT’s order?
48) Cell phone manufacturer LZT has to choose between two options for sourcing parts: Japan-
based Keiko Inc. and US-based Global Tech. How can Keiko reduce the total customer cost for
LZT?
49) Create a value proposition for cell phone manufacturer LZT.
50) Shoe retail chain Berry’s has noticed an increase in complaints about customer service at its
stores and is beginning to lose customers to competitors. The company needs to identify the
problems and rectify them. Give two methods Berry’s can use to discover the problem.
51) Give an example of two products that have different performance quality but are of equal
conformance quality.
52) ________ lines up customers along columns and products along rows to show the
profitability of selling a product to a customer.
A) Mystery shopping
B) Activity-based costing (ABC)
C) Customer profitability analysis (CPA)
D) Customer lifetime value (CLV)
E) American Customer Satisfaction Index (ACSI)
53) Cable TV operators and cellular carriers suffer from high levels of ________, or customer
defections.
A) customer retention
B) customer churn
C) detraction
D) share-of-wallet
E) customer complaints
54) The 80-20 rule reflects the idea that ________.
A) 20 percent of the company’s profits are generated by the top 80 percent of customers
B) the top 20 percent of customers are highly satisfied and 80 percent of customers will
recommend the company to a friend
C) 20 percent of customers are unprofitable, and 80 percent make up a company’s profits
D) the top 20 percent of customers often generate 80 percent of the company’s profits
E) any new product will be accepted by 20 percent of the customers immediately, but 80 percent
of the customers will be up for grabs throughout the product’s life cycle
55) A profitable customer yields a ________.
A) cost stream that exceeds by an acceptable amount his revenue stream
B) revenue stream that exceeds the company’s cost stream
C) cost stream that exceeds the company’s revenue stream
D) revenue stream that exceeds by an acceptable amount his cost stream
E) revenue stream that equals the company’s cost stream
56) A ________ is a person, household, or company that over time yields a revenue stream that
exceeds by an acceptable amount the company’s cost stream of attracting, selling, and servicing
that customer.
A) prospector
B) profitable customer
C) market challenger
D) market nicher
E) pioneer customer
57) Customer profitability analysis (CPA) is best conducted with the tools of an accounting
technique called ________.
A) input-output analysis
B) factor analysis
C) revenue-based costing
D) activity-based costing
E) future date costing
58) Which of the following is true for activity-based costing (ABC)?
A) ABC considers the real costs associated with each product.
B) With ABC, the company can estimate all costs coming from the customer, less revenue.
C) The tools of ABC can be used to conduct customer profitability analysis.
D) It identifies the costs of products and services based on the revenue they generate.
E) ABC allocates indirect costs in proportion to direct costs.
59) ________ describes the net present value of the stream of future profits expected over the
customer’s lifetime purchases.
A) Activity-based costing
B) Customer lifetime value
C) Customer value analysis
D) Customer-perceived value
E) Customer profitability analysis
60) A profitable customer is a person, household, or company that over time yields a revenue
stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling, and
servicing the customer.
61) A customer’s profitability is judged on the basis of the lifetime stream of revenue and cost,
not the profit from a particular transaction.
62) Unprofitable customers who defect to a competitor should be encouraged to do so.
63) Customer profitability analysis is best conducted with the tools of an accounting technique
called activity-based costing.
64) Activity-based costing tries to identify the real costs associated with serving each customer.
65) Activity-based costing does not consider indirect, variable, and overhead costs.
66) Customer lifetime value describes the net present value of the stream of future profits
expected over the customer’s lifetime purchases.
67) What technique is used for customer profitability analysis?
68) A customer ________ is any occasion on which a customer encounters the brand and product
— from actual experience to personal or mass communications to casual observation.
A) touch point
B) point of order
C) point of difference
D) pivot point
E) point of parity
69) A customer touch point for Abacus Airlines would be an item such as ________.
A) ease of access to the airport
B) a mechanic’s ability to service the airplanes
C) the reservations desk
D) the value of air travel versus surface transportation
E) competency of a travel agent