43) Which of the following statements best describes a customer lifetime value (CLV)?
A) CLV is the value placed upon a retailer by a consumer.
B) CLV is a numerical value of how much a “best customer” shops.
C) CLV is what a customer contributes to a retailer’s profits over his or her entire relationship with
the retailer.
D) CLV is an assessment of how many valued customers shop with a retailer.
E) CLV is what retailers use to rate the value of guaranteed merchandise.
44) Based on the following customer purchase data, which customer would have a higher lifetime
value to the retailer?
Customer
Feb.
March
April
May
June
July
Marcia
$10
$10
$10
$10
$10
$10
Jan
$10
$20
$30
$30
$20
$10
Cindy
$40
$40
Alice
$150
A) Marcia
B) Jan
C) Cindy
D) Alice
45) Which of the following statements does not describe how retailers use a customer lifetime
value (CLV)?
A) CLV is used to identify and cater to the best and more profitable customers.
B) CLV should be estimated under the assumption that the customer’s future purchase behaviors
will be the same as they have been in the past.
C) Sophisticated statistical methods are typically used to estimate the future contributions from
past purchases.
D) An RFM analysis is often used by catalog retailers and direct marketers in estimating their
customers’ lifetime value.
E) A customer who spends $800 twice a year has a higher CLV than a customer that spends $100
each month.
46) Which of the following retail analytic applications involves the use of search techniques to
gain insights into customers’ buying patterns?
A) Factor analysis
B) Regression analysis
C) Data mining
D) Data scraping
E) Data cloning
47) Depending on the amount of money you have in Wachovia bank, you will receive a variety of
different services. The lower-tiered customers are charged $7 to use a teller but can receive the
same services for free if they use an ATM. Charging low-tiered customers for using live tellers is
Wachovia’s approach to
A) getting the lead out.
B) letting customers opt out.
C) tailoring offers for these customers.
D) soliciting feedback.
E) offering better services.
48) ________ are applications of statistical techniques and models that seek to improve retail
decisions through analyses of customer data.
A) Retail analytics
B) Redress analytics
C) Strategic analytics
D) Information drafts
E) Data clones
49) ________ help in measuring a customer’s CLV by using the data collected about customers.
A) Retail analytics
B) Risk analytics
C) Portfolio analyses
D) Biometrics
E) RFM analyses
50) A way to achieve customer alchemy is through ________, which involves offering and selling
more products and services to existing customers and increasing the retailer’s share of wallet with
these customers.
A) 1-to-1 retailing
B) add-on selling
C) personalizing
D) data mining
E) cross retailing
51) What is customer alchemy?
A) Converting iron and gold customers into platinum customers
B) Offering more products to existing customers
C) Increasing the data collection from only platinum and gold customers
D) Creating a group of customers bound together by loyalty to a retailer
E) Tailoring loyalty programs to suit customers’ needs
52) Many products in a supermarket can be found in more than one place throughout the stores.
What type of retail analytics technique is used to decide where to place products in a store?
A) Supermarket analysis
B) Market basket analysis
C) Location analysis
D) Shopping cart analysis
E) Merchandising analysis
53) Which of the following terms best describes the type of data analysis that focuses on the
composition of products purchased by a customer during a single shopping trip?
A) Allotment analysis
B) Market basket analysis
C) Location analysis
D) Shopping cart analysis
E) Merchandising analysis
54) Since Yolanda used ________ to analyze what her customers often buy together during a
single store visit, she knows to place facial tissues by the cold medicine and Wonder Bread by the
Skippy Peanut Butter in her store.
A) market basket analysis
B) cookies
C) merchandising analysis
D) RFM analysis
E) location analysis
55) Which of the following statements is true of frequent-shopper programs?
A) They are highly beneficial for building long-term customer loyalty.
B) The discounts offered appeal mostly to price-conscious customers.
C) Customers are able to clearly differentiate the programs offered by different retailers.
D) Competitive advantages gained from these programs are sustainable.
E) Effective frequent-shopper programs are easy to develop.
56) Millhouse loves books and often shops at a nearby Book Universe store. At the beginning of
the year, he enrolled in a $5 program, and he would get a percentage off on the purchases he made
throughout the year. Which of the following best demonstrates this type of approach toward
customer retention?
A) Community
B) Sales promotion
C) Frequent-shopper program
D) Personalization
E) Special customer service
57) Which of the following statements is true of frequent-shopper programs?
A) Frequent-shopper programs are inexpensive to implement and manage.
B) It is easy to make changes in CRM programs.
C) It is clear that CRM programs increase customer spending and loyalty.
D) It is hard to gain competitive advantage with CRM as programs can be duplicated.
E) The advantages of frequent-shopper programs are unlimited.
58) Which of the following statements is true of a tiered reward structure?
A) It provides an incentive for customers to consolidate their purchases with one retailer to reach
the higher tiers.
B) It helps retailers determine which products customer purchases during a single shopping trip.
C) It uses software to discover new insights into the buying patterns of customers using large
databases.
D) Customers belonging to the same tier form a retail brand community.
E) A tiered reward structure charges customers who use services.
59) What does the 80–20 rule mean?
A) 80% of the buying comes from 20% of the vendors.
B) 80% of the sales come from 20% markdowns.
C) 80% of the customers pay with 20% of their income.
D) 80% of the sales or profits come from 20% of the customers.
E) 80% of the merchandise is sold at 20% off.
60) Why would the customer pyramid be more appropriate in identifying a customer’s lifetime
value than utilizing the traditional 80–20 rule?
A) The 80–20 rule doesn’t recognize the behavior of 20 percent of the customers.
B) The 80–20 rule focuses only on the value of 80 percent of the shoppers.
C) Customers can more easily identify where they would be located in the customer pyramid than
within the 80–20 rule.
D) If shoppers only buy 20 percent of the time, retailers have a missed sale 80 percent of the time.
E) The 80–20 rule does not consider important differences among the 80 percent of customers in
the “rest” segment.
61) In the customer pyramid, which of the following segments consists of customers with the top
25 percent CLVs?
A) Gold segment
B) Platinum segment
C) Iron segment
D) Lead segment
E) Silver segment
62) Which of the following statements is true of the gold segment members in the customer
pyramid?
A) Price plays a greater role in their decision-making process.
B) The gold segment members place more value on customer service.
C) Their spending levels and profitability do not warrant special treatment.
D) They demand a lot of attention but buy very little from retailers.
E) This segment is composed of the customers with the top 25 percent CLVs.
63) Which of the following statements is true of the customer pyramid?
A) Customers in the iron segment need special attention from the retailer to grow their potential to
be better customers.
B) All customers regardless of their segment must receive equitable promotional benefits.
C) Customers in the lead segment buy merchandise on sale or abuse return privileges.
D) Customers in the gold segment are the most profitable and loyal customers.
E) Customers in the platinum segment place little emphasis on customer service.
64) CRM programs directed toward customers in the high-value segment
A) offer more discounts.
B) are focused on maintaining loyalty.
C) give more importance to frequent-shopper programs.
D) attempt to discourage 20 percent of shoppers.
E) provide online shopping options without processing charges.
65) Which of the following approaches toward retaining customers has retailers offering unique
benefits and targeted messages to individuals?
A) Segmentation
B) Personalization
C) Frequent-shopper programs
D) Add-on selling
E) Community
66) Which of the following statements does not describe personalization implemented as a CRM
program?
A) It overcomes a limitation of CRM strategies that treat all customers in a platinum segment as
identical.
B) With the availability of customer-level data and analysis tools, retailers can now economically
offer unique benefits and target messages to individual customers.
C) The Internet channel provides an opportunity for retailers to automate personalization and
efficiently develop relationships similar to those that many small local retailers have with
customers.
D) It helps retailers to convert their unprofitable customers in the lead segment in the customer
pyramid to best customers.
E) The effective use of customer information in personalization programs creates the positive
feedback cycle in the CRM process.
67) Developing retail programs for small groups or individual customers is referred to as
A) cross selling.
B) a loyalty program.
C) a share of wallet program.
D) add-on selling.
E) 1-to-1 retailing.
68) The Bird of Paradise is one of the world’s most attractive tropical flowers. When Josiah, who
owns Joe’s Flower Shop, knows he’s receiving flowers from Hawaii, he emails all his customers
whom he knows will like the flower and informs them of the expected shipment. Josiah’s program
is an example of
A) a frequent-shopper program.
B) a loyalty program.
C) gaining competitive advantage.
D) add-on selling.
E) 1-to-1 retailing.
69) A ________ is a group of customers who are bound together by their loyalty to a retailer and
the activities the retailer sponsors and undertakes.
A) frequent shopper community
B) retail brand community
C) consideration set
D) target market
E) customer pyramid
70) The release of the new Harry Potter book brought excitement in Enid’s neighborhood. The
local Book Universe store sold thousands of vouchers for the night of the release. The store invited
Harry Potter enthusiasts to come for a party at the store that lasted until midnight when the book
would be available for purchase. Book Universe developed a customer retention program based on
A) a market basket analysis.
B) creating a sense of community among its customers.
C) 1-to-1 retailing programs.
D) a tiered rewards program.
E) the concept of add-on selling offers for preferred customers.
71) How can retailers enhance customer loyalty?
72) What information does a data warehouse contain?
73) What are the factors affecting the degree to which consumers feel their privacy concerning
personal information has been violated?
74) What is a customer lifetime value (CLV), and how is it estimated?
75) What is market basket analysis, and when do retailers utilize it?
76) What are the objectives of frequent-shopper programs?
77) What are the four factors that limit the effectiveness of frequent-shopping programs?
78) How is the customer pyramid more appropriate than the 80–20 rule when identifying
customers?
79) Describe practices that retailers use to convert good customers into their best customers.
80) Describe approaches that retailers use in dealing with unprofitable customers.