Test Yourself

This section offers ten multiple-choice questions to help you identify your baseline knowledge of customer focus.

Answers to the questions are given at the end of the test.

1. What are the “three Rs” of customer loyalty?

a. Revenues, retention, and returns.

b. Retention, related sales, and referrals.

c. Recognition, reward, and research.

2. How much does the typical marketing budget devote to seeking new customers versus maintaining current customers?

a. 90 percent to seeking new customers; 10 percent to maintaining current customers.

b. 20 percent to seeking new customers; 80 percent to maintaining current customers.

c. 50 percent to seeking new customers; 50 percent to maintaining current customers.

3. Which of the following statements is accurate about target customers?

a. Their expectations remain stable over time.

b. They change companies to find the best prices and capture big incentives.

c. They place the highest value on the goods or services your company offers.

4. Which mutually reinforcing connections form the “service-profit chain”?

a. Innovative services and products, attractive pricing, and incentives for customer loyalty.

b. Employee capability, job satisfaction, and productivity; employee loyalty; customer satisfaction and loyalty.

c. A healthy marketing budget, higher-than-expected profits, and deep understanding of customer needs.

5. High employee turnover can harm the service-profit chain by disrupting continuity with customers, increasing customer defections, and reducing profitability. What’s the first step you would take to reduce employee turnover?

a. Take stock of which skills your employees need to provide excellent customer service and provide the training needed to close any skills gaps.

b. Provide your current best employees with incentives and recognition to ensure that they stay with the company.

c. Hire people with a customer-focused attitude, with the idea that you’ll train them for the skills they’ll need in their jobs.

6. Which of the following is the best step to take when trying to support the service-profit chain for your department or group?

a. Ensure that the front-line employees who have the most direct contact with customers feel the most ownership for delivering results customers want.

b. Reward your longest-tenured customer-facing employees for measurable demonstrations of politeness, empathy, and knowledge in their customer dealings.

c. Ensure that all the direct reports who work in your unit take responsibility for delivering the results that your company’s customers want.

7. You’ve decided to conduct an audit, one of the listening posts through which companies can learn what products and services customers want and how to better serve customers. Which of the following would you do to conduct the audit?

a. Be a mystery shopper by visiting one of your company’s retail or other business sites and pretending to be a customer.

b. Gather a large or small informal group of target customers together to test an initial product idea, design, or concept.

c. Commission a research company to study customer demographics, lifestyles, buying habits, and preferences.

8. To further use listening posts, you decide to initiate a program of follow-up satisfaction calls. What guidelines would you provide the people who would be conducting these calls?

a. Take the opportunity to ask extensive questions about how the customer perceives the company’s offerings and service quality.

b. Ask if everything’s okay, present a few simple questions about the company’s offerings, and provide additional service if needed.

c. Besides asking about and providing service, describe additional offerings the customer may find valuable or interesting.

9. How is the customer value equation expressed?

a. Price plus results, divided by product quality plus promotional investment.

b. Product plus price, divided by promotional effort plus place (distribution channel used).

c. Results plus process quality, divided by price plus access costs.

10. A colleague tells you she’s concerned because an order that recently went out to a customer was delivered late, and the product suffered damage during shipment. What might you tell her about recovery from customer-service mistakes?

a. Dissatisfied customers are more likely than others to give feedback about problems and voice complaints directly to the company.

b. Recovering from service mistakes can actually increase customer loyalty and contribute to a company’s profitability.

c. Customers who experience creative service recovery tell others less often than those who experience good service the first time.

Answers to test questions

1, b. The three Rs explain why loyal customers are most profitable. Through retention, loyal customers continue to buy products. Through related sales, they buy new products and services. Through referrals, customers praise your company to other people. The three Rs reduce costs, because new sales to existing customers require less marketing, eliminate the hassle of new credit checks, and create less paperwork than selling to new customers. Also, the cost of actually serving and supporting a customer who is familiar with a company and its product lines generally decreases over time.

2, a. Most companies today don’t work very hard at developing relationships with long-term customers. Instead, they focus almost all their energy on getting new customers. They mistakenly believe that, to make a profit, they must increase market share. This belief leads to the misguided notion that any customer is a good customer.

3, c. Because target customers highly value your company’s offerings, they remain loyal over time. The most successful firms know exactly who their target customers are, focus their energy on creating offerings to please them, and adapt their products and services to meet and exceed these customers’ changing expectations.

4, b. Here’s how the service-profit chain’s mutually reinforcing connections work: When employees have the right skills, support, and rewards, they find their jobs more satisfying. People who enjoy their work become loyal to the company. Loyal employees take time to get to know customers’ specific needs and circumstances, creating customer satisfaction and loyalty. And as we’ve seen, loyal customers are profitable customers.

5, c. Skills can be taught, but it’s difficult to train someone to have the right attitude. When you select job candidates for their customer-focused attitude and train them to acquire needed skills, you set the “employee cycle of success” in motion. You complete the success cycle by providing the tools and support employees need to excel, giving them latitude to deliver value to customers, and rewarding them for their contributions to high-quality service.

6, c. Great front-line service—in the form of polite, empathetic, and knowledgeable customer-facing employees—is not enough. Everyone in an organization needs to have a customer-focused attitude in order to support the service-profit chain. No one should be exempt, not even workers who spend little or no time in front of customers. For example, a talented software programmer who lacks a customer-focused attitude may delay product releases, annoying customers and his teammates. Unhappy customers and employees may defect, breaking the service-profit chain.

7, a. Audits can generate highly objective information about how customer service can be improved. Audits take many forms. Perhaps the most popular is mystery shopping, whereby someone visits the company’s retail or other business sites and acts as a customer; makes calls to customer-service providers; or actually consumes the company’s products or services. But be sure to use audits to gather useful information, not to assign blame or punish people for making customer-service mistakes. Otherwise, employees may view auditing as unfair or as a form of spying.

8, b. Follow-up satisfaction calls can help your company spot service-recovery problems before they begin and can reveal more general information about what target customers value or do not value. They can also help establish trust between the company and the customer. However, to avoid annoying the customer, follow-up calls should be brief, take place shortly after the transaction with the customer, and be a sincere effort to ask about and provide service—not to push other products.

9, c. Customers’ perceived value of a product or service they’ve purchased increases when (a) they feel the offering generated valuable results and was delivered in a dependable, timely, and pleasant way, and (b) they feel that the price and any costs associated with obtaining the product are reasonable.

10, b. Customers who experience creative service recovery tell others more often than those who experience routinely good service the first time. Thus, companies can increase customer loyalty and profits by finding ways to provide fast, personalized service recovery—and get it right the second time. Successful service companies recover quickly and learn from their mistakes.