Question 1

What is CLV, and what are its components?

Accepted Answer

CLV is a measure of the future financial value of the customer's purchases with an organization. It takes into account the following aspects:
How much the customer spends on each purchase with the firm and the resulting profit How often the customer purchases from the firm
How likely the customer is to remain a customer in the future
How much it costs to serve the customer
The organization's discount rate for calculating the net present value of the future purchases

Question 2

What is the importance of SCLV?

Accepted Answer

Second customer lifetime value refers to the CLV for customers who defect but are won back. It is important because it costs far less to win customers back than to attract those who have never been a customer in the first place. Of course it is important to factor in the costs of winning back lost customers.

Question 3

Customers assess service quality on 5 dimensions. Briefly describe each dimension.

Accepted Answer

Tangibles: Physical facilities, equipment, and appearance of personnel Reliability: Ability to perform the promised service dependably and accurately Responsiveness: Willingness to help customers and provide prompt service Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence Empathy: Caring, individualized attention the firm provides its customers

Question 4

List some useful measures of cross-selling and up-selling effectiveness.

Accepted Answer

The answer of List some useful measures of cross-selling and...

Question 5

List some useful measures of customer acquisition effectiveness.

Accepted Answer

The answer of List some useful measures of customer acquisition...

Question 6

Why should firms calculate CLV and customer equity?

Accepted Answer

The answer of Why should firms calculate CLV and customer...

Question 7

An acquisition/defection matrix indicates

Accepted Answer

A)   Which type of customer is entering and leaving
B)   Which VAN members are short vs. long term
C)   Who a company is losing their customers to and gaining them from
D)   The relationship between satisfaction scores and retention
E)   None of the above

Question 8

Construct an acquisition/defection matrix and explain it.

Accepted Answer

The answer of Construct an acquisition/defection matrix and explain it....

Question 9

Define "size of wallet" and "share of wallet" and give an industry example.

Accepted Answer

The answer of Define "size of wallet" and "share of...

Question 10

List some useful measures of customer retention effectiveness.

Accepted Answer

The answer of List some useful measures of customer retention...

Question 11

How can the SERVQUAL instrument be used by an organization?

Accepted Answer

The answer of How can the SERVQUAL instrument be used...

Question 12

When companies want to determine how effective their CRM methods have been in developing closer bonds with their customers, they often do it by

Accepted Answer

A)   Using behavioral proxies for psychological variables
B)   Measuring retention
C)   Monitoring the number of customer complaints
D)   All of the above
E)   All of the above except C and D

Question 13

Very often customers change their buying behavior before defecting. Consequently, many companies have developed leading indicators of customer defection. What are these leading indicators that are often forerunners of defection?

Accepted Answer

The answer of Very often customers change their buying behavior...

Question 14

Of 100,000 customers who were active in 2005, 60,000 are still active in 2006. The maverage retention rate is

Accepted Answer

A)   It can't be determined since the initial 100,000 have not been segmented into cohorts.
B)   40%
C)   1 × .9 × .6 = 54%
D)   60%
E)   None of the above

Question 15

Useful measures of the effectiveness of customer retention efforts do not include which of the following?

Accepted Answer

A)   Average defection rate
B)   Average lifetime value
C)   Survival rate
D)   Yield rate
E)   All are useful measures of retention efforts

Question 16

Frederick F. Reichheld holds a strong belief regarding the relationship between customer satisfaction and customer retention. What is his belief?

Accepted Answer

The answer of Frederick F. Reichheld holds a strong belief...

Question 17

Useful measures of how successful a company has been in developing closer bonds include

Accepted Answer

A)   Measures of overall loyalty
B)   Measures of yield rate
C)   Capture rate ratios
D)   All of the above
E)   Only A and B

Question 18

When computing the benefits of CRM or "what did we get in return?", experience indicates

Accepted Answer

A)   Given today's scientific measures, it is quite easy
B)   This is the one area of CRM that all companies consistently dp
C)   There are 5 key effectives measure everyone agrees on
D)   It is much easier for small companies than for large companies
E)   All the above are false.

Exam 12: CRM Program Measurement and Tools