Principles of Marketing Exam #1 - Answer Key

72 the aim of customer relationship management is to

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72. The aim of customer relationship management is to create not just customer satisfaction, but customer delight. Explain. a. Answer: Customer satisfaction cannot be taken for granted. Because brand loyalty is dependent upon strong customer satisfaction, companies strive to retain, satisfy, and even delight current customers. Firms create customer delight by promising only what they can deliver and then delivering more than what they promised. They also create emotional relationships with key customers. Delighted customers make repeated purchases and become customers for life. More importantly, they also essentially become an unpaid sales force for the firm as "customer evangelists" who tell other potential customers about their positive experiences with the product. 73. Define customer equity and explain why it is important to a company. a. Answer: Customer equity is the sum of the lifetime values of all a company's current and potential customers. Customer equity is dependent upon customer loyalty from a firm's profitable customers. Because customer equity is a reflection of a company's future, companies must manage it carefully, viewing customers as assets that need to be maximized. 74. Explain how the Internet has transformed the way in which we do business today. a. Answer: The Internet links individuals and businesses of all types to each other. The Internet allows firms access to exciting new marketspaces. The Internet has spawned an entirely new breed of "click only" companies–the "dot-coms." The post-Internet frenzy of the late 1990s has introduced companies that are both savvy and face promising futures. These companies use a set of new Web technologies to reach customers, including blogs (web logs), cell phones, video games, and social networking sites. "Brick-and-mortar" companies of the past are now "click-and-mortar" companies, with online presences aimed at attracting new customers and strengthening bonds with current customers. Approximately 70% of American Internet users now shop online, making a Web presence a necessity for any organization. 75. One of the major developments in marketing can be summed up in one word: relationships. Define customer relationship management and its associated tools and levels of relationships. 12 | P a g e
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Principles of Marketing Examination #1 a. Answer: Customer Relationship Management (CRM) is the process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. A company with mostly low-margin customers is likely to seek basic relationships, using brand-building advertising and sales promotion. An organization with few customers and high margins, on the other hand, will work to create key partnerships with select customers. To create stronger bonds with customers, some marketers use tools such as financial benefits or rewards based on frequency of purchase. Other tools include social benefits, like offering key customers the opportunity to network and create communities through club marketing programs. To retain current customers and remain profitable, companies today are going beyond transactional marketing to customer relationship management. The key is to create and sustain relationships for the long term. 13 | P a g e
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