Advance Competative Strategy

1. Which of the following statements about switching costs are true?

[pic 1]Keeping old customers is typically less profitable than gaining new customers.

[pic 2]The annual profit per customer after acquisition usually increases over time.

[pic 3]Firms should prevent switching of customers to competitors, because new customers are hard to acquire and are not profitable immediately.

[pic 4]To prevent customer churn, firms should try to keep their switching costs low.

[pic 5]To prevent customer churn, firms should try to keep their customers' switching costs high.

2. Which of the following statements about switching costs are true?

[pic 6]Long-standing customers are better than new ones because they are more loyal to the company.

[pic 7]New customers are more beneficial to the profit of a firm, because better contracts and products can be sold.

[pic 8]Preventing customers from switching is less important than increasing the quality of services in the car insurance industry.

[pic 9]An increasing churn rate can be observed in the telecommunication industry.

[pic 10]Long-standing customers are better than new customers because often customers are not profitable from the start.

3.  Which of these examples create switching costs for the respective consumer?

[pic 11]A coffee shop introduces a scheme that gives customers a free coffee after having had six (paid) cups. You have had four cups so far.

[pic 12]A car manufacturer specializes in electric vehicles.

[pic 13]You have saved your image files on floppy discs and hardware manufacturers have abandoned producing floppy disc drives. You just realized that you sold your old computer which had such a drive.

[pic 14]A computer manufacturer offers free software as an additional service to existing customers.

[pic 15]A German railroad company sells a card to commuters which makes future travels by train less costly for this group of people.

[pic 16]An electrical power producer decreases its prices.

[pic 17]One company develops an innovation and as a consequence dominates the market.

[pic 18]A mobile communication servicer lowers the download volume for its flat rate contracts.

4. Through which mechanisms could an airline company increase consumer switching costs?

[pic 19]Vouchers for alternative airlines.

[pic 20]Professional customer service.

[pic 21]Offer less customer service.

[pic 22]Mile-based loyalty programs.

[pic 23]Charge extra baggage fee.

[pic 24]Specific customer friendly booking tools.

5. What could a smartphone manufacturer do to increase the switching costs of his customers?

[pic 25]Give loyal customers who bought their last two cellphones at the company a discount on the purchase of the next cellphone.

[pic 26]Start producing classical landline telephones.

[pic 27]Offer less customer service.

[pic 28]Increase smartphone prices to ensure exclusivity.

[pic 29]Increase the number of available apps which can only be used by the firm’s cellphones.

[pic 30]Increase the number of countries where free repair services for travelers are offered.

[pic 31]It could open its app-store to other smartphones' operating systems.

[pic 32]Offer payment contracts which can run up to two years.

[pic 33]Start selling proprietary complementary products like exterior cellphone loudspeakers or solar cellphone chargers.

6. Which statement about first degree price discrimination is true?

[pic 34]It is essential that the firm lowers all of its prices.

[pic 35]First degree price discrimination is always possible if the consumers can easily resell the products.

[pic 36]With first degree price discrimination, customer satisfaction is higher.

[pic 37]The firm can set different prices for different customers.

[pic 38]First degree price discrimination is beneficial for customers.

[pic 39]First degree price discrimination could be achieved with individual negotiation.

[pic 40]First degree price discrimination can increase the firm’s profits.

[pic 41]The firm knows the consumers’ willingness to pay perfectly.

7. What is true about second degree price discrimination (SDPD)?

[pic 42]SDPD is possible if firms know the willingness to pay of a consumer group.

[pic 43]Consumers cannot self-select according to their willingness to pay.

[pic 44]Bundling and non-linear pricing are types of SDPD.

[pic 45]Firms offer different deals, e.g. various combinations of prices and quality / quantity.

[pic 46]Firms do not need to know an individual consumer's characteristics and preferences.

[pic 47]Versioning and cost-cutting are types of SDPD.

8. Statistica is a software that comes in two different versions: A regular version sold for 200 Euro and a student version with reduced functionality sold at 100 Euro.

What is this type of price discrimination called?

[pic 48]Versioning

[pic 49]Third degree price discrimination

9. There are three groups of consumers. The first group consists of 10 people who would purchase an album by Beyoncé at a price of 30 USD, but would not purchase an album by Jay-Z at all. In the second group, there are also 10 people who would only like to purchase the album by Jay-Z for a price of 30 USD but would not spend any money on an album by Beyoncé. In the third group, you have ten people who would be willing to buy both albums for a price of 20 USD each.