Chapter 10 practice

Which of the following statements is true of a tiered reward structure?

It provides an incentive for customers to consolidate their purchases with one retailer to reach the higher tiers.

Which of the following statements is true of customer loyalty?

It is an emotional connection between a retailer and a customer.

Which of the following statements is true of frequent-shopper programs?

It is hard to gain competitive advantage with CRM as programs can be duplicated.

Which of the following approaches toward retaining customers has retailers offering unique benefits and targeted messages to individuals?

Personalization

In the customer pyramid, which of the following segments consists of customers with the top 25 percent CLVs?

Platinum segment

Which of the following statements is true of the gold segment members in the customer pyramid?

Price plays a greater role in their decision making process.

Why is constructing a customer database more difficult for in-store transactions than it is for online shopping?

Store purchases can be made with cash or third-party credit cards.

Why would the customer pyramid be more appropriate in identifying customer's lifetime value than utilizing the traditional 80-20 rule?

The 80-20 rule does not consider important differences among the 80 percent of customers in the "rest" segment.

Which of the following statements is true of frequent-shopper programs?

The discounts offered appeal mostly to price-conscious customers.

Developing retail programs for small groups or individual customers is referred to as _____.

1-to-1 retailing

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:

1-to-1 retailing.

What does the 80-20 rule mean?

80% of the sales or profits come from 20% of the customers.

Which of the following statements does NOT describe how retailers use a customer lifetime value (CLV)?

A customer who spends $800 twice a year has a higher CLV than a customer that spends $100 each month.

What is customer alchemy?

Converting iron and gold customers into platinum customers

_____ indicates that customers are committed to purchasing merchandise and services from the retailer regardless of competing retailers' enticements.

Customer loyalty

Which of the following is a reason for consumers to have privacy concerns regarding cookies?

Customers cannot realize the amount of information being collected without their knowledge.

Which of the following statements is TRUE of the customer pyramid?

Customers in the lead segment buy merchandise on sale or abuse return privileges.

Which of the following retail analytic applications involves the use of search techniques to gain insights into customers' buying patterns?

Data mining

Which of the following information does NOT form a part of the customer database of a retailer?

Details of competitor patronization

Which of the following statements is NOT TRUE of frequent-shopper programs?

Frequent-shopper cards are issued on the basis of market basket analysis.

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?

Frequent-shopper program

Which of the following statements does NOT describes the customer relationship management process that retailers implement?

All of these statements describe customer relationship management.

When Lana went to Bookdreams.com to look for books on health and wellness, she saw a personalized greeting and books recommendations. The greeting and books recommendations were based on her previous visits to the site. Which of the following best describes how Bookdreams.com knew that Lana has accessed their site?

Bookdreams.com placed cookies on her computer to identify her.

Which of the following statements best describes a customer lifetime value (CLV)?

CLV is what a customer contributes to a retailer's profits over his or her entire relationship with the retailer.

At La Rue Fashions, there is a certain customer who makes large purchases every Friday and returns everything two weeks later. In response, the manager recently created a policy and published it. It included specifics of the store's terms regarding returned merchandise stating that all tags must be intact; the clothing must not have been worn; and it must be returned within seven days to receive credit. Which of the following best describes the retailer's actions?

Getting the lead out

Which is the final step in the CRM process?

Implementing programs

Which of the following statements correctly describes the practices regarding customer privacy in the U.S.?

In the U.S., personal information is generally viewed as being in the public domain, and retailers can use it in any way they desire.

Which of the following statements does NOT describe personalization implemented as a CRM program?

It helps retailers to convert their unprofitable customers in the lead segment in the customer pyramid to best customers.

Based on the following customer purchase data, which customer would have a higher lifetime value to the retailer? (chart on TB)

Jan

Retailers will use all BUT which of the following to retain and increase share of wallet from their best customer?

Lower prices

_____ identify and provide rewards to customers who patronize a retailer.

Loyalty programs

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?

Market basket analysis

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?

Market basket analysis

If a U.S. retailer wants to conform to the European policies concerning how customer information is collected, which type of policy should it adopt?

Opt in

Which of the following principles forming the basis of a new legislation on consumer privacy encourages retailers to treat consumer privacy as their default setting?

Privacy by design

A(n) _____ is used by catalog retailers and direct markets to identify the best prospects on the basis of how recently the customers made a purchase, how often they make purchases, and how much they spent.

RFM analysis

_____ is a method often used in catalog and Internet channels to determine customer segments that a retailer should target for a promotion or send a catalog.

RFM analysis

_____ uses the data on recent purchases made by customers to evaluate the potential contribution of each customer segment.

RFM analysis

_____ are applications of statistical techniques and models that seek to improve retail decisions through analyses of customer data.

Retail analytics

_____ help in measuring a customer's CLV by using the data collected about customers.

Retail analytics

Which of the following describes an approach that is used to deal with unprofitable customers?

Retailers charging a restocking fee for returned merchandise

_____ refers to the percentage of the customers' purchases made from the retailer.

Share of wallet

Which of the following is an inherent limitation associated with asking the customer for identifying information for building a customer database?

Some customers may feel that the sales associate is violating their privacy.

When Mary purchased some caulk for her windows at Home Depot, the cashier asked for her telephone number at the point-of-sale. What was the retailer doing by asking this question?

The retailer was collecting data for the store's database.

What is the primary objective of CRM process?

To develop a base of loyal customers who patronize the retailer frequently

Before Emily started her transaction at a retailer, the cashier requests her to register her fingerprints and credit card details. Emily can now pay for products without having to use her credit card or cash each time she shops. Her fingerprint would suffice. Which method of collecting customer data is the retailer using?

Using biometrics

When customers join the Daily Needs Reward Zone, they receive one point on every purchase they make at Daily Needs stores and DailyNeeds.com. Reward Zone points are converted to reward certificates which can be redeemed for merchandise at Daily Needs stores or on DailyNeeds.com. Reward Zone Members also receive exclusive offers throughout the year and a "special reward" for their birthday. This strategy by Daily Needs is an example of _____.

a customer loyalty program

Airlines and credit cards that offer points for each dollar spent are utilizing ____ for effective customer relationship management.

a loyalty program

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.

add-on selling

CRM programs directed toward customers in the high-value segment:

are focused on maintaining loyalty.

The first step in the CRM process is _____.

collecting customer data

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 is seen developing a customer retention program based on:

creating a sense of community among its customers.

A(n) _____ forms the foundation for all CRM activities.

customer database

A business philosophy and set of strategies, programs, and systems that focuses upon identifying and building loyalty with a retailer's most valued customers is called _____.

customer relationship management

Customer loyalty means:

customers are committed to purchasing from the retailer and will seldom shop at competing stores.

The objective of the CRM process is to:

develop loyalty and repeat-purchase behavior.

Biometrics helps customers by:

facilitating a faster checkout.

Electronic retailers can collect transaction data for their data warehouse, but they can also collect information by placing cookies on a visitor's hard drive. Cookies are:

files that identify visitors when they return to a website.

Wilbur uses Books-A-Million customer card, Kash-N-Karry customer card, Blockbuster customer card, and Sandwich Shop customer card when he shops at any of these retailers. Each time he uses them, he gets rewarded with reduced cost, free merchandise, or a credit. These cards form a part of:

frequent-shopper programs.

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:

getting the lead out.

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.

market basket analysis

When consumers explicitly agree to share personal information, the agreement is referred to as _____.

opt in

When consumers explicitly tell the retailer not to use their personal information, they must _____.

opt out

Although, having information about individual customers helps retailers provide better services to consumers, consumers are concerned about _____.

privacy

A _____ is a group of customers who are bound together by their loyalty to a store and the activities the retailer sponsors and undertakes.

retail brand community