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Question 1

Question 1
Milton Friedman introduced the age of shareholder primacy, which basically implied that a key reason that companies exist is to
a) maximize shareholder value.
b) maximize customer value.

Answer 1

a) maximize shareholder value.

Question 2

Question 2
To maximize firm value firms should invest in their number one asset:
a) their infrastructure and equipment.
b) their customers.
c) their inventory.
d) their know-how.

Answer 2

b) their customers.

Question 3

Question 3
Most modern day accounting standards and reporting rules
a) do include customer value.
b) do not include customer value.

Answer 3

b) do not include customer value.

Question 4

Question 4
When calculating CLV, many firms set the time horizon T to
a) 1 year.
b) 3-5 years.
c) 10 years.
d) infinity.

Answer 4

b) 3-5 years.

Question 5

Question 5
In case the short-term relationship is considered important when calculating CLV, it is recommended to set
a) a low discount factor.
b) a high discount factor.

Answer 5

b) a high discount factor.

Question 6

Question 6
Which statement is CORRECT?
a) Customer equity can be defined as the sum of the customer lifetime values.
b) Customer lifetime value can be defined as the sum of the customer equity.

Answer 6

a) Customer equity can be defined as the sum of the customer lifetime values.

Question 7

Question 7
Which actions can be undertaken to increase the CLV?

a) retaining existing customers.
b) deepening customer relationships.
c) acquiring new customers.
d) simplifying customer experiences.
e) customer intimacy.
f) all of the above.

Answer 7

f) all of the above.

Question 8

Question 8
The RFM framework
a) has been introduced recently.
b) has been popular for quite some time.

Answer 8

b) has been popular for quite some time.

Question 9

Question 9
The Pareto principle states
a) For many events, roughly 80% of the effects come from 20% of the causes.
b) For many events, roughly 20% of the effects come from 80% of the causes.

Answer 9

a) For many events, roughly 80% of the effects come from 20% of the causes.

Question 10

Question 10
Recency can be defined as
e^(γ⋅t)
e^γ
e^(-γ⋅t)
e^(-γ)

Answer 10

e^(-γ⋅t)

Question 11

Question 11
According to most research, including the research conducted by myself,
a) the recency variable is usually the most important of the RFM framework.
b) the frequency variable is usually the most important of the RFM framework.
c) the monetary variable is usually the most important of the RFM framework.

Answer 11

b) the frequency variable is usually the most important of the RFM framework.

Question 12

Question 12
Trend features, such as decrease or increase in monetary value, usually turn out to be
a) very predictive in any analytical CLV setting.
b) not very predictive in any analytical CLV setting.

Answer 12

a) very predictive in any analytical CLV setting.

Question 13

Question 13
A common way of creating an RFM score is by categorizing the RFM variables into
a) quartiles.
b) quintiles
c) deciles.

Answer 13

b) quintiles

Question 14

Question 14
Dependent RFM sorting works in a
a) sequential way.
b) parallel way.

Answer 14

a) sequential way.

Question 15

Question 15
Suppose the cost per marketing message is 5$ and the gross revenue per response 100$. In order to be profitable, we should only target the RFM segments with response rates
a) bigger than 2%.
b) bigger than 5%.
c) bigger than 10%.
d) bigger than 50%.

Answer 15

*b?

grossrevenue 100*5% response rate -> = 5, should at least cover cost

Question 16

Question 16
Which of the following are important attention points when doing an RFM based marketing campaign?
a) make sure that one customer/household gets one message only.
b) carefully check customer data (e.g., name, gender, address, etc.).
c) send the campaign data to external agency for mortality check.
d) all of the above.

Answer 16

d) all of the above.

Question 17

Question 17
The RFM variables can be used as input variables for various analytical CLV models such as
a) churn prediction.
b) response modeling.
c) customer segmentation.
d) CLV analytical models.
e) all of the above.

Answer 17

e) all of the above.

Question 18

Question 18
Which statement is CORRECT?
a) We can aggregate the RFM variables up to firm level so as to approximate a firm’s customer equity.
b) In the literature, the RFM has been extended to the RFMPD model. P stands for performance and D for delivery of service.

Answer 18

a) We can aggregate the RFM variables up to firm level so as to approximate a firm’s customer equity.

o RFMPD: Payment (quickness) & Data (on last payment).

Question 19

Question 19
Besides marketing, the RFM variables can also be used in setting such as
a) fraud analytics.
b) web analytics.
c) social media analytics.
d) all of the above.

Answer 19

d) all of the above.

Question 20

Question 20
The RFM variables can be used

a) only for your existing customer portfolio.
b) only for prospects.
c) both for your existing customer portfolio and prospects.

Answer 20

a) only for your existing customer portfolio.