Chapter 04 - Strategic Customer Relationship Management

Chapter 04
Strategic Customer Relationship Management
 

True / False Questions

 

1. (p. 115) Customer lifetime value provides the estimated profitability of a customer (business

or consumer) during the time span of the relationship. 
TRUE

Difficulty: Easy
 

2. (p. 118) Customer relationship management emphasizes focusing the company's strategy on

customer profitability and the gains from reducing customer "churn." 
TRUE

Difficulty: Moderate
 

3. (p. 118) Only the marketing function of the firm is likely to have involvement with certain of
the customer relationship management processes and activities. 
FALSE

Difficulty: Moderate
 

4. (p. 120) While sometimes attractive economically, there is a risk that overseas call centers
may undermine the quality of customer relationships and pose a threat to corporate and brand
reputation for those who employ them. 
TRUE

Difficulty: Moderate
 

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5. (p. 121) The value proposition explains the relationship among the performance of the
product, the fulfillment of the customer's needs and the total cost to the customer over the
customer relationship life cycle. 
TRUE

Difficulty: Moderate
 

6. (p. 123) The multi-channel integration process is arguable one of the most important processes
in customer relationship management because it takes the outputs of the business strategy and
value creation processes and translates them into value-adding activities with customers. 
TRUE

Difficulty: Moderate
 

7. (p. 123) Since customer relationship management decisions are just technology decisions they
are pretty simple. 
FALSE

Difficulty: Easy
 

8. (p. 124) When decisions are made about a company's customer priorities using historical
customer profitability, only short-term issues should be considered. 
FALSE

Difficulty: Challenging
 

9. (p. 124) When British Airways made the decision to focus only on its profitable business-class
passengers at the expense of economy travelers, Virgin Airways gained the economy-class
passengers by offering a better value proposition than British Airways. 
TRUE

Difficulty: Moderate
 

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10. (p. 126) Investment in customer relationship management to build competitive advantage

may be an illusion if a company focuses only on automated call centers and customer
complaint systems. 
TRUE

Difficulty: Moderate
 
 

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Multiple Choice Questions

 

1. (p. 114) Which of these initiatives would not be part of customer relationship management? 

A. Automated customer contact systems
B. Recall market research
C. Sales force productivity
D. Customer service and automated call centers

Difficulty: Moderate
 

2. (p. 114) Which of these statements is not an element of customer relationship management? 

A. Identifying, satisfying, retaining and maximizing the value of a firm's best customers
B. Wrapping the firm around the customer to ensure that each contact with the customer
is appropriate and based upon extensive knowledge of both the customer's needs and
profitability
C. Creating a full picture of the customer
D. Developing a marketing strategy

Difficulty: Moderate
3. (p. 114) _____ is the information technology that enables companies to develop customer
relationship management strategies. 
A. Word processing
B. Spreadsheet
C. Graphic
D. Database
 

Difficulty: Easy
 

4. (p. 115) _____ calculates the sum of all the margins of all the products purchased over time by
the customer less the cost of reaching that customer. To this is added a forecast of margins on
future purchases discounted back to their present value. 
A. Net present value
B. Customer lifetime value
C. Customer net sales
D. Customer annual profitability

Difficulty: Easy
 

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5. (p. 115) The _____ process provides an estimate of the profitability of a customer during the
time span of the relationship. 
A. Net present value
B. Customer lifetime value
C. Customer net sales
D. Customer recent profitability

Difficulty: Easy

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Essay Questions
1. (p. 114) How should customer relationship management be defined to provide a
complete strategy perspective? 
CRM prefer to little more than building relationships with customers to match a company’s
product and service offer better with customer needs. Others see CRM as developing a unified
and cohesive view of the customer, without regard to how the customer chooses to
communicate with the organization. Emphasis is placed on enhanced customer service and the
use of call centers to provide consistency in how the company interacts with customers. CRM
may focus only on the creation and use of a customer database to support decision makers. It
is important to shift attention from the technology and hardware of CRM to the continuing
process of making managerial decisions with the end goal of increasing the value of the
customer base through better relationships with customers, usually on an individual basis.

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Difficulty: Mode

2. (p. 122) Discuss the value received by the organization from customer relationship

management. 
The value received by the organization via CRM is customer lifetime value. CLV is the
expected profitability of a customer over the time-span of the relationship with the customer.
The sum of CLV for all of a firm’s customer is termed customer equity. CLV provides useful
information in selecting valuable customers for targeting. Value received by the customer is
also relevant. It is important to recognize the potential negative impact of issues regarding
consumer trust on CRM activities. If buyers believe that the information collected by their
suppliers may be used to exploit them, their trust in the relationship may be jeopardized.
Accordingly, executives need to recognize trust and privacy implications of CRM initiatives.
CRM approaches may also be valuable in identifying less attractive customers and developing
effective ways to handle this issue.

Difficulty: Moderate
 

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3. (p. 124) What is the relationship between customer relationship management and market

segmentation. 

the relationship between customer relationship management and market segmentation are
The availability of CRM data provides the opportunity to update the measures used by
managers to assess the success of their brands in the marketplace. Traditional financial and
market-based indicators like sales, profitability and market share will continue to be
important. However, CRM allows the development of measures that are customer-centric and
more insightful concerning marketing strategy effectiveness. Beside that, it is important that
when decisions are made about a company’s customer priorities using historical customer
profitability, long-term issues should be considered.

 Difficulty: Challenging
 

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