Chapter 2

Question 1

what is considered in customer behaviour?

Answer 1

all the mental, emotional, and physical activities that buyers go through to choose, purchase, and use products and services.

Question 2

What are the 5 formal stages of the purchase decision process?

Answer 2

1. problem recognition
2. information search
3. Evaluation of alternatives
4. purchase decision
5. postpurchase evaluation.

Question 3

What is a routine response strategy?

Answer 3

a purchasing strategy that is automatic and typically requires little or no thought by the customers making hte purchase decisions.

Question 4

When would you use a routine response strategy?

Answer 4

for low-involvement products - which are low-price frequently purchased items.

Question 5

What are high-involement products?

Answer 5

those products that are bought infrequently, are in an unfamiliar product category, or may involve a large cash outlay.

Question 6

What is an extensive problem-solving strategy?

Answer 6

a purchasing method that takes the buyer through all five stages of the purchase decision process.

Question 7

Why is the organizational purchase decision more complicated than the consumer decision process.

Answer 7

1. purchase often involves more than one person
2. peoiple involved in the deicion typically possess expert knowledge about the product or service
3. product is selected for the benefit of an end user who is not involved in the purchase decision process
4. organizations are often able to 9negotiate with the seller for feat, pricing etc.
5. regulations may restrict an organization’s buying behavior.

Question 8

What is a buying centre?

Answer 8

an informal, cross-deparment decision unit consisting of several people whose main goal is to acquire, spread and process information for purchase decisions.

Question 9

When would a problem recognition occur?

Answer 9

1. when someone uses the last of an existing supply of a product or recognizes that an existing supply is running low
2. when someone recognizes that an existing product no longer fits or works
3. purchases a product that requires auxiliary products
4. develops new product needs or wants

Question 10

How does marketing play a role in the problem recognition stage?

Answer 10

by educating customers so that they become aware of needs and wants.

Question 11

Define the term motivation

Answer 11

the internal force that drives people to reach a purchase decision.

Question 12

What is the theory that motivation is based on?

Answer 12

Abraham Maslow’s heirarchy of needs- classifies needs into 5 hierachial categories.

Question 13

According to abraham Maslow’s law, is it lower-level needs or higher-level needs that come first?

Answer 13

lower-level needs, need to be met before high-level needs.

Question 14

What is considered a personal source of information?

Answer 14

friends, family, work associates and social network contacts.

Question 15

What is considered a public source?

Answer 15

governmental angencies, industry associations, newspaper and magazine articles, and product testing-organizations.
- considered to be unbiased and therefore valuable.

Question 16

What is considered a marketer-dominated source?

Answer 16

salespeople, websites, point-of-purchase displays, sales promotion literature, advertisements, facebook pages or any other outlet a company used.
- these sources eventually get used, at some point during the information searching process.

Question 17

Define the term perception?

Answer 17

is the process by which people select organize and interpret information to give it meaning

Question 18

Define the term cultural values

Answer 18

the shared forms of learned behaviour that are passed from one generation to another.

Question 19

What is a reference group?

Answer 19

any group that an individual identifies with so closely that the person adopts many of the beliefs, values, and norms that the group as a whole accepts.

Question 20

Individuals typically have primary and secondary reference groups. Can you please define these?

Answer 20

1. primary: interacts with eachother face to face and may include family, friends, coworkers, or neighbors.
2. Secondary- members who share a common interrest./skill and may include professional work or trade association groups. - they have less continuous direct interaction with eachother, and as a result have less influence on customer behaviour

Question 21

Define the term selective perception

Answer 21

The process by which a person decides to acknowledge and use certain pieces of information and ignore the rest.

Question 22

Define the term preconceptions

Answer 22

ideas about reality based on values, attitudes, beliefs, learning, and previous experiences - and then organize and interpret new information according tot heir preconceptions.

Question 23

What is selective distortion?

Answer 23

a perceptual process by which people interpret new information in ways that fit with their preconceptions and block out or modify information that conflicts with their preconceptions.

Question 24

What is selective retention?

Answer 24

a perceptual process by which people remember and internalize information that supports their preconceptions.

Question 25

At the end of an informaiton search, people compile a set of alternative choices called evoked set. The size of the evoked set depends on what factors

Answer 25

1. the important of the purchase to the customer 2. amount of time the customer wants to, or can, spend comparing alternatives 3. budget contrainst >> may also depend on administrative cababilities and strategic priorities.

Question 26

Define the term evaluative criteria, in terms of method to compare alternative in the evoked set before making a purchase decision

Answer 26

includes products/service features, characteristics or speicifications, this will include both objective and subjective criteria.

Question 27

For financial products, the evaluative criteria might include which objective factors?

Answer 27

1. price: premiums, commission fees, admin charges 2. benefits: faceamount, dividends, aux benefits, illustrated rates of premiums 3. financial ratings- of the providing company

Question 28

For financial products, the evaluative criteria might include which subjective factors?

Answer 28

1. feeling about the financial professional selling the product. 2. opinions expressed by others about the providing company 3. perceptions about the reputation of the company or the financial professional 4. overall customer experience.

Question 29

What is the postpurchase evaluation?

Answer 29

after a purchase is made4 the customer will evaluate the overall purchase experience with the company and how well the purchase satisfies their needs.

Question 30

Define the term cognitive dissonance

Answer 30

A state of psychological tension or uneasiness

Question 31

Define the term buyer's remorse?

Answer 31

when the buyer questions whether he should have purchased a product at all, or whether he should have purchased an alternative brand or a different product at all, or whether he should have purchased an alternative brand or a different product then the one they bought.

Question 32

Name some reasons a purchase may be delayed

Answer 32

1. the product is unavailable for purchase 2. a competitor makes a new offer 3. adverse information suddenly becomes available 4. the customer has too much/too little information 5. the customers product needs change 6. other circumstances (such as job loos and illness) or other needs take place.

Question 33

How can insurance companies lessen the effects of cognitive dissonance and buyer's remorse?

Answer 33

1. providing a free-look over period 2. scheduling follow-up calls with new customers to answer any questions 3. offering regular updates on products performances and event-driven options 4. maintaining regular, ongoing, relevant and meaningful communications with customers 5. providing superior and convenient customer service through a variety of methods, such as the telephone, text messages, online chat, or social media forums 6. creating advertisements that support and reinforce a customers' trust in a company.

Question 34

Define the term heuristic

Answer 34

a simplifying rule, or rule-of-thumb, that people use when making decisions.

Question 35

What is simplifying rule known as anchoring and adjustment, used in insurance purchasing?

Answer 35

where customers focus on one initial attribute of a product and fail to adequately adjust other variables based on this anchor.

Question 36

Favourable marketing presentations rely on a concept known as Framing- define this

Answer 36

the tendency of a decision maker to react to a situation differently depending on the way in which the information is presented.

Question 37

Insurance marketing also must recognize availability bias- define this

Answer 37

the tendency of purchasers to use only information that is easy to find. This suggests that people who buy insurance ely to a large extent on 1. opinions of friends, family and social media 2. advice from financial professionals and financial advisors 3. company advertisements and marketing materials

Question 38

What is a customer-centric company?

Answer 38

a company that prioritize customer needs and relationships. | They reguraly gather information from their customers to better satisfy needs and improve the experience.

Question 39

What are 4 criterias that a company must follow in order to build customer relationships?

Answer 39

1. Learn: from every customer interaction, in order to 2. Match: products and services and advice to customers needs, 3. Create: customer value and satisfaction, and 4. Build: customer trust and customer lotalty

Question 40

What is the 'customer sacrifice'

Answer 40

The gap between what a customer wants and what a company can provide

Question 41

What term is given, when a company selects one group of customers over another, the decision not to pursue a particular group?

Answer 41

an oppertunity cost- the benefit that is forfeited or given up in choosing one alternative over another.

Question 42

What do you call a customer that is a good fit for a company why?

Answer 42

High-value customers 1. have needs that the company can satisfy 2. desire a company's products 3. purchase multiple products 4. buy more expensive or higher-profit-margin products 5. are loyal to the company over time 6. recommended the company to others

Question 43

What are low-value customers?

Answer 43

they have needs that a company cannot easily satisfy, who only occasional purchase a company's products, or buy inexpensive or low-profit-margin products.

Question 44

What is the Pareto's Principle

Answer 44

called 80-20 rule, which states 80 precent of a company's profits are generated by 20% of its customers.

Question 45

What is lifetime value (LTV)?

Answer 45

the economic benefit a company receives from its relationship with a customer over time. it requires compnicated calculations to typically predicts times of products that will fit their need.

Question 46

Value assigned to a customer can be divided into 3 types of values. Define this

Answer 46

1. historical value: transactions to date 2. current value: value of expected transactions 3. potential value: value realizable if the company persuades the customer to increase future spending and/or reduce future expenses by changing behavior pattens.

Question 47

Define the term Customer satisfaction

Answer 47

The perception that a company's products and services meet the customer's expectations and satisfy the customers' needs.

Question 48

Define the term customer engagement

Answer 48

this goes beyond customer satisfaction, indicating the emotional attachment or involvement customers have with a company and its representatives.

Question 49

While satisfied customers oftern will switch to a competitor for a lower price or additional benefit, highly engaged customers are more likely to be loyeal customers who do what for the company?

Answer 49

1. provide steady, dependable income 2. valuable sorce of new customers through referrals 3. provide valuable feedback 4. less likely than satisfied customers to switch to a competitor

Question 50

what is customer retention?

Answer 50

The degree to which customers remain with a company for the long term

Question 51

How does retaining customers have a direct impact on the company's profitability?

Answer 51

1. new customer 6-8x more expensive then the cost of retaining current customers 2. current customers less price sensitive that new customers- reconice the company value 3. long-term customers = cheerleaders generating +ve word of mouth

Question 52

How does an insurance company determine customer retention at a company level?

Answer 52

by measuring persistency- which is the retention of business that occurs when an insurance policy remains in force by continued payment of policy renewal premiums.

Question 53

What is persistency rate?

Answer 53

the measurement of the persistency of a block of insurance policies determined by the percentage of business in force at the beginnign of a specified period that remains in force at the end of that period, and is determined after calculating a lapse rate.

Question 54

How do you calculate hte lapse rate?

Answer 54

(business in force that terminates for nonpayment of premium surrenders) / (business in force at the benignning of the period) Persistancy rate is 100% - lapse rate.

Question 55

Persistancy is often measured using howmany month lapse rate

Answer 55

13-month lapse rate, which is the proportion of new policies on which no part of any required second-year premium has been paid. *its too include lapse of annual premium policies.

Question 56

Why is calculating an accurate lapse rate for first-year policies important?

Answer 56

1. first year lapses are usually an early and good indicator of whether quality business is being sold, because lapses are generally higher in first year 2. First year lapse allerts the company to problems with product or distribution 3. first-year policy lapses have great -ve impact on product' profitability than lapses in other years

Question 57

How do companies create value for the customer?

Answer 57

simplifying products, engaging in life event-oriented marketing, customizing products and services to individual customer needs, and offering tiered service.

Question 58

What is life event-oriented marketing?

Answer 58

its designed to meet specific, definable customer needs as those needs arise. ie: baby, house, promotion, retirement etv...

Question 59

What is mass customization? What benefits does it offer differentiated customer groups?

Answer 59

the high-level personalization of product offerings and service delivery on a large scale. 1/ relevant products iwth optional enhanced benefits 2/ personalized marketing pieces 3/ peronalized human interactions 4/ personalized product and service delivery

Question 60

What is tiered service?

Answer 60

in this service all customers receive a consistent basic level of service, but high-value customers receive more services or higher levels of service.

Question 61

How can a company tier service?

Answer 61

1. fee variance: high value = pay less, | 2. service variance: high value = additional services.