File: Chap008, Chapter 8, Metrics

True-False

1. Financial metrics provide a means of forecasting success and tracking the success of a firm’s
strategy.
Ans: F
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2. Metrics are too static and narrowly focused to be of any use in e-commerce.
Ans: F
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3. Focusing attention on measurement can improve the precision of the value proposition.
Ans: T
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4. The real-time nature of e-commerce facilitates the use of performance tracking.

Ans: T
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5. The balances scoreboard is designed to bring increased attention to the firm’s short-term
performance.
Ans: F
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6. While customer desires must drive strategy creation, customer satisfaction cannot be measured
until the strategy has been implemented.
Ans: T
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7. Market opportunity metrics include the tracking and analysis of the strategies of competitors.
Ans: T
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8. Customer metrics are used to identify potential customer needs.

Ans: F
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9. According to the “Life Cycle of A Company” concept, a firm does not need to focus upon
customer retention until it reaches maturity.
Ans: F
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10. Customer satisfaction is among the most important—and easy-to-track company metrics.
Ans: F
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11. Despite their importance to the firm, financial metrics are typically lagging indicators of
business performance.
Ans: T
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12. Online data collection has obsoleted traditional market research.

Ans: F
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13. In the final analysis, customer fulfillment metrics may be the MOST critical to a firm’s
success.
Ans: T
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14. While research claims to produce objective facts—the fact the research is designed,
collected, and analyzed by people means that it will always be “contaminated” by subjectivity.
Ans: T
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15. Metrics related to financial information are important to both the firm’s strategic planning
and its ability to raise capital.
Ans: T
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Multiple-Choice

16. Financial metrics are flawed by the fact that they:

A. measure the success of past strategies.
B. cannot alert managers to needed changes.
C. are only output measures.
D. all of the above
Ans: D
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17. The recent stock market scandals added credibility to which of the following arguments
AGAINST the use of metrics?
A. Measurements could be exaggerated to enhance the firm’s ability to attract investors.
B. Meaningful metrics must change on internet time.
C. Measurements require too much time and resource to be practical.
D. Useful metrics would have to change too fast to be useful.
Ans: A
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18. Metrics can assist a firm’s growth and vitality by:

A. better defining the business model.
B. better communicating the firm’s goals and strategies.
C. enhancing performance tracking.
D. all of the above
Ans: D
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19. The use of metrics can enhance:

A. performance tracking.
B. accountability.
C. the alignment of objectives and strategy.
D. all of the above
Ans: D
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20. ___________________ serve(s) as a framework for judging the progress and health of an
online business.
A. The balanced scoreboard
B. Financial weights
C. The performance dashboard
D. Learning metrics
Ans: C
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21. The balanced scoreboard attempts to focus attention on:

A. financial performance.
B. internal business processes.
C. customer responses.
D. all of the above
Ans: D
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22. The balanced scoreboard sought to improve the analysis of firm performance by
supplementing traditional financial data with all of the following EXCEPT:
A. market dynamics.
B. internal business processes.
C. customer metrics.
D. learning and growth metrics.
Ans: A
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23. The investment community is MOST interested in the firm’s:
A. market metrics.
B. financial metrics.
C. employee metrics.
D. partner metrics.
Ans: B
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24. Customer metrics include all of the following EXCEPT:

A. profitability.
B. customer satisfaction.
C. stock price.
D. market share.
Ans: C
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25. Internal business process metrics include all of the following EXCEPT:
A. innovation.
B. market share.
C. operations.
D. post sale service.
Ans: B
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26. A firm may monitor the percentage of total sales coming from new products as an indicator
of:
A. innovation.
B. operations.
C. post sale service.
D. promotional effectiveness.
Ans: A
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27. Employee information, and motivation measurements form the basis for:
A. internal business process metrics.
B. customer metrics.
C. learning and growth metrics.
D. financial metrics.
Ans: C
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28. All of the following are valid criticisms of the balanced scoreboard EXCEPT:
A. unclear definition of strategy or business models.
B. unclear location of organizational capabilities/resources.
C. unclear location of partnerships.
D. unclear treatment of financial data.
Ans: D
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29. Partnerships are featured in the ______________ system of the Performance Dashboard.
A. market opportunity
B. business model
C. resource
D. implementation
Ans: C
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30. The ability to map competitive strategies is part of:

A. market opportunity metrics.
B. business model metrics.
C. implementation metrics.
D. customer metrics.
Ans: A
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31. Value proposition metrics include all of the following EXCEPT:

A. target market.
B. market share.
C. core benefits.
D. resources.
Ans: B
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32. Traditionally, __________________ metrics have been viewed as most critical to the long-
term success of the firm.
A. marketing/branding
B. implementation
C. resource system
D. financial
Ans: D
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33. All of the following are “objective” measures of customer outcomes EXCEPT:
A. acquisition costs.
B. customer satisfaction.
C. average order size.
D. profitability.
Ans: B
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34. The last stage of the company life cycle would be:
A. customer acquisition.
B. monetization.
C. maturity.
D. decline/death.
Ans: D
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35. Generally, firms are expected to reach maturity in about:

A. 5 yrs.
B. 10 yrs.
C. 3 yrs.
D. 15 yrs.
Ans: A
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36. Factors that change ahead of the economy are called:

A. predictors.
B. predicators.
C. leading indicators.
D. conversion factors.
Ans: C
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37. All of the following are leading indicators EXCEPT:

A. financials.
B. advertising.
C. viral marketing campaigns.
D. positive word-of-mouth.
Ans: A
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38. A firm must provide consistency to customers moving between its online and offline
channels in order to achieve a _________________ customer experience.
A. borderless
B. integrated
C. seamless
D. metric
Ans: C
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39. All of the following are advantages of online research EXCEPT:

A. automatic data capture.
B. privacy.
C. real-time data tracking
D. less time-intensive.
Ans: B
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40. Which of the following is the most important stage of the purchase process from BOTH the
customer’s and the firm’s point-of-view?
A. evaluation of alternatives
B. purchase
C. knowledge
D. satisfaction
Ans: D
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41. Firms which feature customer incentive programs are trying to:
A. prejudice alternative evaluation.
B. encourage loyalty.
C. “buy” a purchase.
D. provide satisfaction.
Ans: B
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42. Online security is especially important in the ___________________ stage of the purchase
process.
A. evaluation of alternatives
B. loyalty
C. satisfaction
D. purchase
Ans: D
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43. A firm’s ability to deliver on a customer’s order is called:

A. fulfillment.
B. information-sharing.
C. shipping.
D. delivery.
Ans: A
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44. Information-sharing includes all of the following EXCEPT:

A. ability to open accounts online and offline.
B. ability to access accounts online and offline.
C. seamless order tracking.
D. integrated customer databases.
Ans: C
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45. Fulfillment systems are measured by all of the following metrics EXCEPT:
A. seamless order processing.
B. integrated databases.
C. integrated inventory systems.
D. seamless order tracking.
Ans: B
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46. Online market research tends to emphasize:

A. site usability.
B. customer satisfaction.
C. traffic level.
D. all of the above
Ans: D
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47. Consumer-oriented data research sources:

A. tend to be very up-to-date.
B. often boast a large customer base.
C. are often viewed as trustworthy by other users.
D. all of the above
Ans: D
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48. Online financial information services typically provide:

A. income statements.
B. balance sheets.
C. statements of cash flow.
D. all of the above
Ans: D
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49. BizRate.com is BEST described as a(n):

A. online market research firm.
B. offline market research firm.
C. financial analysis firm.
D. fulfillment specialist.
Ans: A
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50. Which of the following information providers comes closest to being a single source for all
types of data relevant to the internet?
A. Jupiter Media Metrix
B. A. C. Nielson
C. Hoover’s Online
D. Forrester Research
Ans: D
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Essay

51. What are metrics? Why are they important?

Ans: Metrics are measurements of those activities deemed critical to implementing strategy
and/or achieving objectives. A firm must be able to evaluate progress AND determine when
changes are required.
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52. Why are traditional financial metrics not sufficient for evaluating the firm’s progress?
Ans: Financial metrics measure the success of past strategies—but provide no insights into future
results. These metrics are only output measures, but do not provide firm-specific metrics that
precisely track its strategy.
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53. How can the use of metrics improve the quality of a firm’s value proposition and/or business
model?
Ans: A focus on metrics “forces” the firm to define its business model, objectives, and value
proposition in precise, measurable terms. The firm benefits from ore rigorous analysis in the
planning phase—and a more objective-focused approach to implementation/modification during
the term of the plan. Improved analysis of results—with implications for the next planning cycle
—is another important benefit.
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54. BRIEFLY describe the “limitations” of the balanced Scoreboard Model as it applies to online
firms.
Ans: While the model has been useful, it does not provide for (1) a clear definition of strategy or
business models; (2) a clear location of organizational capabilities or resources; or (3) a clear
role for partnerships in the framework. These omissions make it difficult to develop effective
metrics to improve performance in these important areas.
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55. How has “globalization” contributed to problems with the use of traditional financial
metrics?
Ans: In order for these measures to be useful in the world market, they must be COMPARABLE.
Yet, different countries have differing financial reporting/accounting methods, legal systems,
ownership structures, and tax structures. As a result, global financial metrics can be confusing (at
best) or misleading (at worst).
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56. Why is the Life Cycle Concept useful for firms?

Ans: The “Life cycle” (birth, growth, maturity, decline—and death) applies to even “non-live”
entities. Firms are born with the introduction of a new/better satisfaction, grow as (if) the market
accepts it, matures as competitors drain of sales/profits, and declines/dies when competitors
introduce a superior offering. Ideally, the firm can continue to survive—even grow—as its
individual products “die”. to do this, the firm must KNOW what to offer, when to enter, AND
when to exit. Of course, the firm must have a “new” product ready for entry. While the model
does not provide all the answers, it does raise important—if unpleasant—questions.
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57. How can the “Performance Dashboard” be implemented?

Ans: First, the business strategy must be clearly stated. Then, it is possible to identify key actions
and outcomes in critical performance areas—and state these in clear, measurable terms. Thirdly,
appropriate metrics must be chosen to monitor key activities and progress. Next, leading and
lagging indicators must be identified and linked to the appropriate metrics—with particular
emphasis upon those that help the firm focus on the future. Finally, metrics must be calculated to
effectively track current efforts and progress toward objectives.
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58. Why should a firm want to develop metrics to assist the integration of its online and offline
efforts?
Ans: Firms MUST provide satisfaction in ALL of its contacts with the consumer. The goal of a
“seamless” customer experience is not just an ideal. If the firm disappoints in either area, its total
effort will be damaged by lost sales, a lost customer, AND negative word-of-mouth which will
cost more customers.
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59. Why is the postpurchase portion of the consumer process the MOST important part of the
process?
Ans: Traditionally, firms focused upon making the sale. BUT, firms must remember that the
customer will evaluate the firm’s offering AFTER the purchase—and the results of that
evaluation will determine IF he/she will buy again. The culmination of several POSITIVE
iterations is “loyalty” and favorable recommendations. The result of ONE negative evaluation
can easily lead to the reverse.
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60. Why might fulfillment metrics be the MOST critical metric for online firms?
Ans: IF you believe that a successful firm must consistently deliver satisfaction, it is crucial to
monitor how well the firm is going—and where it must improve. After all, most of the early
dot.com “deaths” were caused by fulfillment, not sales, failures.
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