CRM review

Customer Acquisition

1. What is customer acquisition?

   Customer acquisition is the process of gaining new customers for a business by identifying, attracting, and converting potential buyers into paying clients.

2. What customers should businesses seek to acquire?

   Businesses should seek to acquire customers that are likely to be profitable over time.

3. When is customer acquisition most important?

   Customer acquisition is always the most important goal during new product launches and for new business start-ups.

4. Why is customer acquisition important to existing customers?

   Customer acquisition is also important to existing businesses, as customers will always need to be replaced

New Customers:

5. What is a new customer?

   New-to-category customers are customers who have either identified a new need or have found a new category of solution for an existing need.

*New-to-company customers are won from competitors*

• Can be very expensive to acquire, particularly if they are strongly committed to their current supplier.

• A lower value customer with a weaker commitment to their current supplier may be a better prospect.

6. What are the types of non-customers?

   Open non-customers:

   Available non-customers prefer the alternative to their current offer though they have yet to switch, and are ready to switch.

   Ambivalent non-customers are as attracted to the alternative as they are to their current brand.

   Unavailable non-customers:

   Weakly unavailable non-customers prefer their current brands.

   Strongly unavailable non-customers have a strong preference for their current brands.

Offers:

7. What is an example of an offer a marketer can use to reduce the perceived risk associated with a customer's first purchase?

   Correct Answer: Money back guarantees.

8. Engaging audiences who have already interacted with your brand to encourage them to take a specific action is known as _________.
   Correct Answer: Remarketing

9. Describe one way marketers can address the perceived risk of a first-time customer purchase.
   Correct Answer: Marketers can offer money-back guarantees, price-matching, or product-replacement offers to reduce the perceived risk.

Understanding Relationships

KPI stands for Key Performance Indicator

10. KPI: Match the KPI to its description:

Match the KPI to its description:
a) Customer satisfaction rate
b) Customer churn rate
c) Cost to serve customers
d) How effectively individual customer retention strategies are performing

Correct Answer:

• a → Measures how happy customers are with a product or service

• b → Percentage of customers lost over a specific time

• c → The cost associated with delivering services to customers

• d → Tracks the performance of strategies designed to retain customers

11. A company notices a high customer churn rate. Which KPI should they focus on improving to better understand and reduce this issue?
    Correct Answer: Customer satisfaction rate and how effectively individual customer retention strategies are performing.

12. What are two Key Performance Indicators (KPIs) that measure how well a business retains and serves its customers?
    Correct Answer: Customer retention rate and cost to serve customers.

Customer Retention & Development

13. What is the primary goal of a customer retention strategy?
    a) Attracting new customers
    b) Reducing customer defections
    c) Offering the lowest prices in the market
    d) Increasing customer complaints
    Correct Answer: b) Reducing customer defections

14. Which of the following is an example of a negative customer retention strategy?
    a) Loyalty programs
    b) Customer delight
    c) High switching costs
    d) Sales promotions
    Correct Answer: c) High switching costs

15. What does "cross-selling" refer to?
    a) Selling higher-priced items to a customer
    b) Selling additional products or services to an existing customer
    c) Attracting customers from competitors
    d) Selling products at a discount
    Correct Answer: b) Selling additional products or services to an existing customer

16. Which of the following is NOT a Key Performance Indicator (KPI) for customer retention?
    a) Customer satisfaction rate
    b) Cost to serve customers
    c) Total number of competitors
    d) Customer churn rate
    Correct Answer: c) Total number of competitors

17. Selling higher-priced or higher-margin products to an existing customer is called _________.
    Correct Answer: Up-selling

18. The process of growing the value of retained customers is known as _________.
    Correct Answer: Customer development

19. Customers who buy only during promotions or demand excessive discounts are categorized as _________ customers.
    Correct Answer: Low-value

20. List two examples of positive customer retention strategies.
    Correct Answer: Loyalty programs, gamification, adding customer-perceived value, or exceeding customer expectations.

21. What are two key differences between negative and positive customer retention strategies?
    Correct Answer:

    • Negative strategies impose penalties for exiting, such as high switching costs.

    • Positive strategies reward loyalty, such as through loyalty programs or exceeding expectations.

22. Why might a company choose not to retain certain low-value customers?
    Correct Answer: Low-value customers may have unpredictable service needs, demand discounts, or only buy during promotions, making them unprofitable and better suited for competitors.

23. A company notices that customer churn is increasing. Suggest two actions the company could take to address this issue and explain why they might work.
    Correct Answer:

• Conduct surveys to understand customer dissatisfaction (addresses root causes of churn).

• Implement loyalty programs to increase engagement and retention (encourages long-term loyalty).

Understanding Relationships:

24. What is a customer touchpoint?
    a) A single transaction with a customer
    b) A direct or indirect interaction between a customer and a brand
    c) A marketing campaign targeting new customers
    d) A company’s annual financial report
    Correct Answer: b) A direct or indirect interaction between a customer and a brand

80/20 rule

24. What does the 80/20 rule imply in customer relationships?
    a) 80% of customers contribute to 20% of revenue
    b) 20% of customers generate 80% of the total value for the company
    c) 80% of a company’s marketing budget should target 20% of products
    d) 20% of customer complaints are addressed within 80% of the time
    Correct Answer: b) 20% of customers generate 80% of the total value for the company

25. In the loyalty ladder, which stage represents the highest level of customer loyalty?
    a) Prospect
    b) Client
    c) Advocate
    d) Partner
    Correct Answer: d) Partner

26. Customer Lifetime Value (CLV) is best described as:
    a) The total value of transactions in a single year
    b) The average profit from a single purchase
    c) The estimated revenue a customer generates over their lifetime with the company
    d) The annual budget for customer acquisition campaigns
    Correct Answer: c) The estimated revenue a customer generates over their lifetime with the company

27. The process of guiding a customer through different interactions with a brand is called the _________.
    Correct Answer: Customer journey

28. The 80/20 rule highlights that the top _________% of customers generate _________% of a company’s total value.
    Correct Answer: 20; 80

29. Customer Lifetime Value (CLV) focuses on viewing a customer as a _________ rather than a set of independent transactions.
    Correct Answer: Lifetime income stream

30. List two examples of customer touchpoints.
    Correct Answer: Examples include social media interactions, email campaigns, in-store purchases, online advertisements, customer service interactions, or chatbot conversations.

31. Why do companies want to build relationships with customers? Provide two reasons.
    Correct Answer:

    • Economic benefits: Loyal customers reduce marketing costs and have higher retention rates.

    • Increased profitability: Loyal customers buy more and are less likely to switch to competitors.

32. What are the key benefits of loyal customers according to Customer Lifetime Value (CLV)?
    Correct Answer: Loyal customers may pay more, have lower service costs, provide referrals, and contribute to steady revenue growth over time.

33. A company finds that 80% of its revenue comes from 20% of its customers. How should this influence their marketing and customer relationship strategies?
    Correct Answer: The company should prioritize resources to nurture and retain the top 20% of customers, ensuring they remain satisfied and loyal. This can include tailored loyalty programs, enhanced customer service, and exclusive offers to maintain their engagement.

SHORT ANSWER QUESTIONS:

Event-Based or Trigger Marketing

1. What is event-based or trigger marketing? Provide one example.
   Example Answer: Event-based or trigger marketing involves targeting customers based on specific events or triggers, such as a birthday or a subscription renewal.

Customer Segmentation

2. Why is customer segmentation important in marketing?
   Example Answer: Customer segmentation helps businesses tailor their strategies to specific groups of customers, improving relevance and effectiveness.

3. Provide one example of a criterion used for customer segmentation.
   Example Answer: Examples include demographics, purchase behavior, or geographic location.

Customer Engagement

4. List two ways a company can increase customer engagement.
   Example Answer: Examples include loyalty programs, social media interactions, or personalized marketing.

5. What is the ultimate goal of customer engagement?
   Example Answer: To build strong emotional and behavioral connections between customers and the brand.

Customer Journey Loyalty Ladder

6. What are the stages of the customer loyalty ladder?
   Example Answer: Stages include prospect, customer, client, supporter, advocate, and partner.

7. What is the main goal at the advocate stage of the loyalty ladder?
   Example Answer: To turn customers into brand promoters who refer others and speak positively about the company.

Customer Strategy Cube

8. What is the customer strategy cube used for?
   Example Answer: It helps businesses prioritize and develop strategies for different types of customers based on their value and needs.

9. List two dimensions of the customer strategy cube.
   Example Answer: Customer profitability and customer needs.

Touchpoints (Before, During, and After a Purchase)

10. Provide one example of a customer touchpoint before a purchase.
    Example Answer: Examples include online advertisements or social media posts.

11. Provide one example of a customer touchpoint during a purchase.
    Example Answer: Examples include interactions with a cashier or a website checkout process.

12. Provide one example of a customer touchpoint after a purchase.
    Example Answer: Examples include customer service interactions or feedback surveys.

Customer Strategy Cube

13. What is the purpose of the customer strategy cube?
    Answer: To guide businesses in deciding which customer segments to target and serve based on profitability, needs, and behavior.

14. What two key questions does the customer strategy cube help answer?
    Answer:

    • Which segments do we target?

    • Which segments do we actually serve?

Sources of Customer Value

1. What are the three main sources of customer value?
   Answer: Operational excellence, product leadership, and customer intimacy​.

2. Describe what operational excellence means as a source of customer value.
   Answer: Operational excellence focuses on efficiency and cost-effectiveness, allowing companies to offer low prices while maintaining quality​.

3. What does product leadership aim to provide to customers?
   Answer: Product leadership aims to offer the best products or services through continuous innovation​.

4. How does customer intimacy create value for customers?
   Answer: Customer intimacy involves tailoring solutions to meet individual customer needs, offering highly personalized services or products​.

5. Provide an example of a company known for operational excellence.
   Answer: Companies like Walmart, McDonald’s, or Costco are known for operational excellence​.

6. Provide an example of a company known for product leadership.
   Answer: Companies like Apple, BMW, or Intel are recognized for product leadership​.

7. Provide an example of a company known for customer intimacy.
   Answer: Companies like Saatchi & Saatchi or Nordstrom are known for their focus on customer intimacy​.

LONG ANSWERS:

Sources of Customer Value

Question: Explain the three primary sources of customer value and provide examples.
Answer:
The three primary sources of customer value are operational excellence, product leadership, and customer intimacy. These approaches allow businesses to deliver unique value propositions to their customers:

1. Operational Excellence:
   Companies focusing on operational excellence prioritize efficiency and cost-effectiveness in their processes. This allows them to offer customers lower prices and reliable delivery without compromising quality.
   Example: Walmart and McDonald's are known for operational excellence, consistently providing affordable products and efficient service through streamlined operations​.

2. Product Leadership:
   This approach emphasizes innovation and high-quality products or services. Companies pursuing product leadership invest heavily in research and development to maintain their competitive edge and deliver superior offerings.
   Example: Apple and BMW exemplify product leadership by consistently introducing cutting-edge technologies and superior products​.

3. Customer Intimacy:
   Businesses adopting customer intimacy focus on building strong, personalized relationships with customers. They tailor their products and services to meet individual needs, often resulting in higher customer satisfaction and loyalty.
   Example: Nordstrom and Saatchi & Saatchi are known for their ability to provide highly customized experiences for their customers​.

Customer Segmentation

Question: Discuss the concept of customer segmentation and its role in customer portfolio management.
Answer:
Customer segmentation involves dividing a company’s market into distinct subsets of customers with similar needs, preferences, or behaviors. It is a critical element of customer portfolio management, enabling companies to identify, target, and serve different segments effectively.

Key steps in customer segmentation include:

• Data Collection: Using internal and external sources, such as sales records, social media insights, and market research, to gather relevant customer information.

• Segmentation Criteria: Classifying customers based on attributes like demographics, purchasing behavior, or geographic location.

• Value Propositions: Developing tailored value propositions for each segment to meet their unique needs.

Customer segmentation plays a vital role in:

• Targeting Potential Customers: Helping businesses focus resources on acquiring the most promising segments.

• Differentiating Strategies: Allowing companies to implement varied marketing and service strategies for each segment, enhancing relevance and effectiveness.

• Optimizing Resource Allocation: Prioritizing high-value customer segments ensures the best return on investment.