CCRS Customer Lifetime Value & Churn Management

Question 1

What does Customer Lifetime Value (CLV) represent in a business context?

Accepted Answer

The total profit a business can expect from a customer throughout the entire relationship

Answer

CLV represents the total profit a business can expect from a single customer account throughout the entire duration of their relationship.

Question 2

Which formula is most commonly used to calculate basic Customer Lifetime Value?

Accepted Answer

CLV = (Average Purchase Value × Purchase Frequency × Customer Lifespan) − Customer Acquisition Cost

Answer

The standard CLV formula multiplies average purchase value by purchase frequency and customer lifespan, then subtracts acquisition cost to determine net value.

Question 3

How is monthly customer churn rate correctly calculated?

Accepted Answer

(Customers lost in month / Customers at start of month) × 100

Answer

Monthly churn rate divides the number of customers lost during the month by the number of customers at the start of the month, multiplied by 100.

Question 4

A company starts the month with 500 customers, acquires 50 new ones, and ends with 490. What is the churn rate?

Accepted Answer

12%

Answer

Churned customers = 500 + 50 − 490 = 60; Churn rate = (60 / 500) × 100 = 12%.

Question 5

What does ARPU stand for and what does it measure?

Accepted Answer

Average Revenue Per User — the average revenue generated per user per period

Answer

ARPU (Average Revenue Per User) measures the average revenue generated per user per period and is commonly used to benchmark and track revenue efficiency.

(CCRS) Certified Customer Retention Specialist Practice Test

(CCRS) Certified Customer Retention Specialist Practice Test

CCRS Customer Lifetime Value & Churn Management