Chapter 6

Question 1

MSDA expenses

Answer 1

• marketing, selling, distribution, and administrative expenses
• most are independent of the volume and mix of products that the company produces
• cannot be traced through causal relationships to products
• many of these expenses are incurred to market and sell products to cutomers through multiple distribution channels

Question 2

Whale Curve

Answer 2

a graph of cumulative profits versus customers, constructed from an ABC customer profitablilty analysis

Question 3

Activity-based pricing

Answer 3

• establishes a base price for producing and delivering a standard quantity for each standard product
• prices orders, not products

Question 4

Managing Customer Relationships

Answer 4

• includes persuading them to use a greater scope of the company’s product’s and services
  *

Question 5

Pricing Waterfall

Answer 5

• due to the multiple revenue leaks from list price caused by speical aloowances and discounts granted to obtain the order and build customer loyalty.

Question 6

Salesperson Incentives

Answer 6

• a typical salesperson’s compensation plan sets minimum quotas and commissions based on sales revenue, and it ties bonuses and rewards to achieving sales revenues above a stretch target
• encourage salespeople to close deals and generate revenues without regard to the cost of fullfilling the speical arrangements negotiated in the deal and the impact of discounts and allowances granted to close the deal

Question 7

Customer Lifetime Value

(CLV)

Answer 7

CLV= ∑_(t=1)^(t=n)▒〖(M_t-c_t )×(〖retention rate〗_t)〗^(t-1)/〖(1+i)〗^t - (Initial acquisition Cost)

• M_t = Margin (revenue less cost) from customer in year t
• c_t = Any additional costs-toserve (and retain) customer in year t
• i= cost of capital (e.g., 10%)
• assumes that the company can estimate the probability of retaining a customer from one year to the next, which it calls the retention rate, r

Question 8

Customer Satisfaction

Answer 8

• most companies today attempt to calculate some metrics on this

Question 9

Customer Loyalty

Answer 9

• the desired behavior of repeated and increased purchases of the product or service

Question 10

Share of Wallet

Answer 10

• loyal customers, as measrued by the customer devoting an increasing “share of wallet” for repeat purchases from the same supplier

Question 11

Net Promoter Score (NPS)

Answer 11

• the percentage of customers who are promoters (score of 9 or 10) less the percentage that are detractors (score of 1 through 6)