CH19: Building Customer Loyalty

Question 1

the 5 stages of the customer acquisition funnel

Answer 1

• awareness
• appeal
• ask
• act
• advocate

Question 2

conversion rate

Answer 2

the percentage of customers who move from one stage to the next

Question 3

retention rate

Answer 3

the percentage of customers who who continue to use the service or product over a predetermined period

Question 3

customer satisfaction

Answer 3

a person’s feelings of pleasure or disappointment that result from comparing the perceived performance or outcome of a product or service to expected performance or outcomes

Question 3

the 2 aspects of quality

Answer 3

• performance (overall functionality)
• consistency (the degree to which performance remains the same over time)

Question 4

the 7 main outcomes for a highly satisfied customer

Answer 4

• stays loyal for longer
• buys more
• talks favorably of the company
• pays less attention to competitors
• is less sensitive to price (inelastic demand)
• offers ideas to the company
• costs less to serve than new customers

Question 5

the 3 main ways to build customer loyalty

Answer 5

• interact closely with customers
• develop loyalty programs
• build brand communities

Question 6

brand community

Answer 6

a specialized community of consumers and employees whose identification and activities revolve around the brand

Question 7

customer relationship management

Answer 7

CRM; the process of carefully managing detailed information about individual customers and all customer touchpoints to maximize loyalty

Question 8

customization

Answer 8

making the company’s offering as personally relevant as possible to as many customers as possible

Question 9

permission marketing

Answer 9

marketing to customers only after gaining their express permission; based on the premise that marketers can no longer use interruption marketing

Question 10

customer empowerment

Answer 10

the ability of customers to choose whether and how they want to engage with company marketing; social media experiences must provide tangible value

Question 11

the 6 main steps in dealing with customer complaints

Answer 11

• make it easy for customers to complain
• set up a 24/7 hotline
• reach out to dissatisfied customers
• identify the real source of dissatisfaction before finding a solution
• accept responsibility
• resolve the complaint

Question 12

customer lifetime value

Answer 12

CLV; customer equity; the monetary equivalent of the value that customers will create for the company during their tenure with the company

Question 13

activity-based costing

Answer 13

aims to identify the real costs associated with serving each customer—the costs of products and services based on the resources they consume; all revenue less all costs

Question 14

how do customer equity and brand equity differ?

Answer 14

customer equity focuses on the bottom-line financial value; brand equity tends to emphasize strategic issues, and provides practical guidance for specific marketing activities

Question 15

which types of companies focus on brand equity vs customer equity?

Answer 15

in general, product-centric companies focus on brand equity, and service-centric companies focus on customer equity

Question 16

the 5 main strategies to build CLV

Answer 16

• improve customer service
• engage customers
• enhance the growth potential of each customer
• manage unprofitable customers
• reward the most profitable customers

Question 17

the 3 building blocks of trust

Answer 17

• competence
• honesty (telling the truth and keeping promises)
• benevolence (demonstrating concern for the interests and goals of customers and employees)

Question 18

CLV financial definition

Answer 18

the net present value of the stream of future profits expected over the customer’s lifetime purchases, applying the appropriate discount rate; includes monetary and strategic value