Question 1

When conducting a customer lifetime value analysis,networking potential and learning potential are more difficult to evaluate than core business potential and cross-selling potential.

Accepted Answer

Networking potential and learning potential are less tangible and more difficult to quantify compared to core business potential and cross-selling potential, which are directly related to revenue generation. Therefore, they can be challenging to evaluate when conducting a customer lifetime value analysis.

Question 2

Which term refers to the net present value of future cash flows attributed to the customer relationship?
A) customer loyalty
B) customer retention
C) customer attractiveness
D) customer lifetime value

Accepted Answer

Customer lifetime value (CLV) refers to the net present value of future cash flows attributed to the customer relationship, including both revenue and costs associated with serving the customer over time. CLV is a critical metric for businesses to understand the profitability and strategic importance of their customer base. Choices A, B, and C are related concepts but do not specifically refer to the net present value of future cash flows.

Question 3

By analyzing customer lifetime value,a firm can most likely ________ for a specific customer group.
A) implement direct marketing
B) establish marketing strategies
C) evaluate personal selling approaches
D) assess international distribution methods

Accepted Answer

By analyzing customer lifetime value, a firm can determine the profitability of a specific customer group, their purchasing habits, and their potential value over time. This information can then be used to establish effective marketing strategies to maximize the value of the customer group. Direct marketing, personal selling approaches, and international distribution methods may also be informed by customer lifetime value analysis, but they are not the most likely outcome.

Question 4

Which of the following is NOT one of the categories used to analyze customer profitability?
A) customer output-unit-level costs
B) customer lifetime value costs
C) customer batch-level costs
D) customer-sustaining costs

Accepted Answer

Customer lifetime value costs are not a category used to analyze customer profitability in the traditional sense. Instead, customer profitability analysis typically focuses on the costs directly related to serving the customer, such as customer output-unit-level costs, customer batch-level costs, and customer-sustaining costs. Customer lifetime value is a broader concept that estimates the total value a customer brings over their entire relationship with a company.

Question 5

Which term refers to the cash flow from new customer relationships through customers' word-of-mouth?
A) networking potential
B) core business potential
C) learning potential
D) cross-selling potential

Accepted Answer

Networking potential refers to the ability of a business to generate new customer relationships through word-of-mouth referrals. This can result in increased cash flow for the business. Core business potential refers to the ability of a business to generate revenue through its main products or services. Learning potential refers to the ability of a business to gain knowledge or skills that can be applied to improve performance. Cross-selling potential refers to the ability to sell additional products or services to existing customers. None of these options specifically refer to cash flow generated from new customer relationships through word-of-mouth referrals.

Question 6

Customer profitability is calculated by analyzing ________ and ________.
A) product marketing costs; customer support costs
B) customer-sustaining costs; production costs
C) costs of goods sold; customer discounts
D) customer costs; customer revenues

Accepted Answer

Customer profitability is calculated by analyzing the costs associated with serving a particular customer and the revenues generated from that customer. This includes understanding the costs of all interactions with the customer, including sales, marketing, customer service, and support costs. It also involves examining the revenue generated from the customer, including the price paid for products or services and any additional revenue from the relationship such as referrals or cross-selling opportunities. Option A, B, and C do not accurately capture the two key elements of analyzing customer profitability.

Question 7

How can a customer portfolio help marketers with customer relationship management? What are the four types of customers identified in a customer portfolio? As a marketer,on which types of customers would you primarily focus?

Accepted Answer

The answer of How can a customer portfolio help marketers...

Question 8

What is indicated by a net promoter score?
A) customer satisfaction with a product
B) customer attachment to a brand
C) customer lifetime value
D) customer profitability

Accepted Answer

Net promoter score (NPS) is a measurement of customer loyalty and attachment to a brand. It is measured by asking customers how likely they are to recommend the brand to others on a scale of 0-10. Customers who score 9-10 are considered "promoters" who are likely to recommend the brand to others, while customers who score 0-6 are considered "detractors" who are unlikely to recommend the brand. The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters, resulting in a score between -100 and 100. A higher NPS indicates greater customer loyalty and attachment to the brand.

Question 9

In most cases,a long-term customer relationship is ________ a short-term customer relationship.
A) more profitable than
B) less profitable than
C) as profitable as
D) no different than

Accepted Answer

Long-term customer relationships are more profitable than short-term ones because building a strong rapport with customers increases their loyalty and the likelihood that they will continue to do business with a company over time. In turn, this generates more revenue and reduces the costs associated with acquiring new customers.

Question 10

All of the following are necessary to calculate the customer lifetime value EXCEPT ________.
A) customer level operating profit per year
B) length of customer relationship
C) economies of scale
D) discount rate

Accepted Answer

Economies of scale are not necessary to calculate customer lifetime value. However, customer level operating profit per year, length of customer relationship, and discount rate are all required factors in the calculation.

Question 11

According to research,it costs a firm five to seven times more to acquire a new customer than to keep an existing customer.

Accepted Answer

This is a widely accepted statistic in the business world based on research conducted by various organizations such as Bain & Company and Harvard Business Review.

Question 12

According to Frederick Reichheld,what is the best indicator for a firm's growth?
A) customer repurchase rates
B) long-term customer retention rate
C) number of customer recommendations
D) ratio of customer profits and marketing costs

Accepted Answer

Frederick Reichheld identified the number of customer recommendations, or the Net Promoter Score (NPS), as the best indicator of a firm's growth. He argued that customers who are promoters of a brand are more likely to contribute to its growth through positive word-of-mouth, leading to new customer acquisition and increased loyalty.

Question 13

The customer portfolio matrix categorizes customers based on ________ and ________.
A) share-of-wallet; production costs
B) customer loyalty rate; market share
C) market share; customer loyalty rate
D) share-of-wallet; customer attractiveness

Accepted Answer

The customer portfolio matrix categorizes customers based on share-of-wallet, which refers to the amount of a customer's total spending that a company captures in the products and services it offers, and customer attractiveness, which encompasses various factors such as the customer's revenue potential, profitability, strategic value, and growth prospects.

Question 14

By measuring customer retention rates,firms can determine both behavioral loyalty and attitudinal loyalty.

Accepted Answer

Customer retention rates primarily measure behavioral loyalty, which is based on repeat purchasing behavior, while attitudinal loyalty refers to a customer's emotional attachment and preference for a brand, which requires different methods to assess, such as surveys or interviews.

Quiz 23: Note : Customer Lifetime Value

When conducting a customer lifetime value analysis,networking potential and learning potential are more difficult to evaluate than core business potential and cross-selling potential.

Which term refers to the net present value of future cash flows attributed to the customer relationship?

By analyzing customer lifetime value,a firm can most likely ________ for a specific customer group.

Which of the following is NOT one of the categories used to analyze customer profitability?

Which term refers to the cash flow from new customer relationships through customers' word-of-mouth?

Customer profitability is calculated by analyzing and .

How can a customer portfolio help marketers with customer relationship management? What are the four types of customers identified in a customer portfolio? As a marketer,on which types of customers would you primarily focus?

What is indicated by a net promoter score?

In most cases,a long-term customer relationship is ________ a short-term customer relationship.

All of the following are necessary to calculate the customer lifetime value EXCEPT ________.

According to research,it costs a firm five to seven times more to acquire a new customer than to keep an existing customer.

According to Frederick Reichheld,what is the best indicator for a firm's growth?

The customer portfolio matrix categorizes customers based on and .

By measuring customer retention rates,firms can determine both behavioral loyalty and attitudinal loyalty.