CCRS Retention Strategies & Loyalty Programs 3 â Questions and Answers
Question 1: Which segmentation approach identifies customers most likely to churn based on recency, frequency, and monetary value of transactions?
- Demographic segmentation
- RFM analysis (Correct answer)
- Psychographic profiling
- Geographic clustering
Correct answer: RFM analysis
RFM (Recency, Frequency, Monetary) analysis scores customers on three behavioral dimensions to predict retention risk and value.
Question 2: A telecom company offers customers a $100 bill credit if they stay for 12 more months. This is an example of:
- Emotional retention through community building
- Contractual lock-in with financial incentive (Correct answer)
- Proactive churn prediction response
- Coalition loyalty partnership
Correct answer: Contractual lock-in with financial incentive
Offering a future financial reward contingent on staying creates contractual commitment backed by monetary incentive.
Question 3: In a points-based loyalty program, what is 'breakage'?
- Points that are fraudulently redeemed by bad actors
- Points earned but never redeemed by customers (Correct answer)
- The cost of fulfilling reward redemptions
- Points transferred between customer accounts
Correct answer: Points earned but never redeemed by customers
Breakage refers to points or rewards that expire or go unused, which represents program liability that never converts to a cost.
Question 4: A company discovers customers who use three or more product features have 70% lower churn. The best action is to:
- Charge more for access to additional features
- Create onboarding flows that guide all new customers to adopt three or more features (Correct answer)
- Restrict feature access to premium subscription tiers only
- Remove underperforming features to simplify the product
Correct answer: Create onboarding flows that guide all new customers to adopt three or more features
Guiding customers to the feature adoption threshold associated with retention directly reduces churn at scale.
Question 5: What distinguishes 'attitudinal loyalty' from 'behavioral loyalty' in customer retention?
- Attitudinal loyalty is driven by exclusive pricing; behavioral loyalty by emotional connection
- Attitudinal loyalty reflects emotional commitment; behavioral loyalty reflects habitual repurchase patterns (Correct answer)
- Attitudinal loyalty applies to B2B; behavioral loyalty applies to B2C customers
- Attitudinal loyalty is measured by spend; behavioral loyalty is measured by NPS
Correct answer: Attitudinal loyalty reflects emotional commitment; behavioral loyalty reflects habitual repurchase patterns
Attitudinal loyalty is a positive emotional attachment to a brand, while behavioral loyalty is simply repeat purchasing regardless of sentiment.
Question 6: A subscription service sends a 'save' offer only to customers who click the cancellation button. This tactic is called:
- Preemptive retention outreach
- Cancellation flow intervention (save offer) (Correct answer)
- Post-churn win-back campaign
- Proactive health score monitoring
Correct answer: Cancellation flow intervention (save offer)
Presenting a targeted offer within the cancellation flow intercepts customers at the moment of highest churn intent to deflect cancellation.
Question 7: Which loyalty program design element has the strongest psychological effect of making customers feel they have already started earning a reward before they've done anything?
- Double-point promotions
- Pre-loaded progress (endowed progress effect) (Correct answer)
- Expiring points mechanics
- Tier downgrade warnings
Correct answer: Pre-loaded progress (endowed progress effect)
The endowed progress effectâgiving customers a head start on a loyalty cardâincreases completion rates because people feel invested from the start.
CCRS Retention Strategies & Loyalty Programs 3
Which segmentation approach identifies customers most likely to churn based on recency, frequency, and monetary value of transactions?