40 Questions
What is customer value defined as?
The difference between perceived benefits and total costs
What are the two factors contributing to the growing importance of customer service as a competitive weapon?
Increase in customer expectations and transition towards commodity type markets
What is marketing defined as?
Management of the 'Four Ps' - product, price, promotion, and place
Why is 'total cost of ownership' used instead of 'price' in defining customer value?
To account for costs other than the purchase price involved in most transactions
What is the formula to calculate customer lifetime value?
Average transaction value x yearly frequency of purchase x customer 'life expectancy'
What is the focus of marketing efforts, according to the text?
Acquiring customers
What is the challenge in designing supply chains mentioned in the text?
To design supply chains from the 'customer backwards'
What is the key to Zara's success, as per the text?
'Fast Fashion' value proposition and quick response supply chain processes
How is customer service described in the text?
Perceptual, and perceptions are the reality
What is the purpose of service segmentation, based on the text?
Identifying key service components, establishing their relative importance to customers, and identifying customer clusters based on service preferences
What is essential to understand the service needs and preferences of customers, according to the text?
Research
How are ranking or rating scales used in the context of customer service components?
To establish the relative importance of customer service components
What do customers often have to trade off when making purchasing decisions, according to the text?
Specific attributes
What did Rolls-Royce develop to ensure performance guarantee for its customers?
'Power by the hour'
What is the potential of existing customers, as mentioned in the text?
Higher profit and potential for growth
What were traditional supply chains designed to optimize?
Internal operations of the supplying company
What does the 'iceberg' effect of total costs of ownership reveal?
Hidden costs beneath the surface of the visible purchase price
How is competitive advantage achieved in terms of customer value?
By delivering more customer value than competitors
What are the elements through which logistics management uniquely influences customer value ratio?
Quality, service, cost, and time
What has earned Caterpillar a world-class reputation?
Its focus on manufacturing, customer support, and logistics
What are the essential elements provided by customer service for businesses?
Pre-transaction, transaction, and post-transaction elements
What does the multivariate nature of customer service require?
A clearly identified policy tailored to specific markets
What percentage of items do stock-outs occur on in supermarkets, leading to customer dissatisfaction and lost sales?
8%
What do just-in-time strategies in industrial markets demand from suppliers?
Higher levels of response to meet demand
What is essential for becoming a preferred supplier in any industry?
Superior customer service
What enhances the impact of a strong consumer and customer franchise?
Efficiency of a supplier's logistics system
What is the relationship between core product, customer service, and logistics?
Multiplicative, maximizing marketing effectiveness
What do 'Servitisation' strategies focus on?
Converting a product into a service to add value
Which quadrant of products should be regularly reviewed for potential deletion from the range?
Quadrant 3
According to the 80/20 rule, what percentage of customer/product transactions contribute to 64% of total profit?
4%
What should be the focus of customer service standards according to the text?
Complete match between customer expectations and what the supplier provides
Which key areas are mentioned for setting customer service standards?
Order cycle time, stock availability, and delivery reliability
What is the implication of the 80/20 rule for both products and customers?
Emphasizes the importance of key accounts and products
Where should Quadrant 4 products be managed according to the text?
Centrally to reduce inventory investment
What is the primary need for Quadrant 2 products according to the text?
High availability and should be held close to the customer
What is the distribution of product service levels according to the text?
Can vary between businesses and markets
What is necessary for defining customer-driven service standards according to the text?
Customer research and competitive benchmarking studies
What rule applies to both products and customers, emphasizing the importance of key accounts and products?
The 80/20 rule
What percentage of total profit do 4% of customer/product transactions contribute to according to the 80/20 rule?
64%
What is the primary implication of the 80/20 rule for customer/product transactions?
Emphasizes the importance of key accounts and products
Study Notes
Managing Product Service Levels and Setting Customer Service Standards
- The distribution of product service levels can vary between businesses and markets
- A matrix in Figure 2.12 combines profit contribution and individual product demand
- Quadrant 1 products require cost reductions due to low profit contribution and high demand
- Quadrant 2 products need high availability and should be held close to the customer
- Products in Quadrant 3 should be regularly reviewed for potential deletion from the range
- Quadrant 4 products, although highly profitable, should be managed centrally to reduce inventory investment
- The 80/20 rule applies to both products and customers, emphasizing the importance of key accounts and products
- The 80/20 rule implies that 4% of customer/product transactions contribute to 64% of total profit
- Customer service standards should aim for a complete match between customer expectations and what the supplier provides
- Key areas for setting customer service standards include order cycle time, stock availability, and delivery reliability
- Standards for technical support and order status information are also essential for effective customer service
- Customer research and competitive benchmarking studies are necessary for defining customer-driven service standards
Test your knowledge on managing product service levels and setting customer service standards with this quiz. Explore topics such as the 80/20 rule, product demand matrix, customer expectations, and key areas for setting service standards.
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