ESB Customer Relationship Management 2 — Questions and Answers
Question 1: What is 'customer segmentation' in CRM?
- Dividing customers into groups based on shared characteristics to tailor marketing efforts (Correct answer)
- Separating internal departments by customer type
- Splitting the company budget by number of customers
- Assigning each customer to a single salesperson
Correct answer: Dividing customers into groups based on shared characteristics to tailor marketing efforts
Customer segmentation groups customers by demographics, buying behavior, or needs so businesses can deliver more targeted and effective marketing messages.
Question 2: Which of the following best describes 'customer retention'?
- Attracting new customers through advertising
- Keeping existing customers engaged and continuing to buy (Correct answer)
- Storing customer data in a secure database
- Tracking customer complaints in a log
Correct answer: Keeping existing customers engaged and continuing to buy
Customer retention refers to a business's ability to keep its existing customers purchasing over time, which is generally less costly than acquiring new ones.
Question 3: An entrepreneur sends personalized birthday discount emails to customers. This tactic primarily supports which CRM objective?
- Lead generation
- Inventory management
- Customer loyalty and engagement (Correct answer)
- Competitive benchmarking
Correct answer: Customer loyalty and engagement
Personalized outreach like birthday discounts makes customers feel valued, directly supporting loyalty and long-term engagement goals.
Question 4: What is 'churn rate' in a subscription-based small business?
- The rate at which new customers sign up per month
- The percentage of customers who cancel or stop using the service in a given period (Correct answer)
- The number of complaints received per 100 customers
- The average time between customer purchases
Correct answer: The percentage of customers who cancel or stop using the service in a given period
Churn rate measures the proportion of customers who discontinue a service within a time period, and a high churn rate signals a retention problem.
Question 5: Which type of loyalty program rewards customers based on the total amount they spend over time?
- Referral program
- Tiered rewards program (Correct answer)
- Points-based program
- Cashback rebate program
Correct answer: Tiered rewards program
Tiered loyalty programs assign customers to levels (e.g., Silver, Gold, Platinum) based on cumulative spending, incentivizing higher spending to reach better rewards.
Question 6: What does 'upselling' mean in the context of customer relationship management?
- Offering a cheaper alternative product to a hesitant customer
- Encouraging a customer to purchase a higher-end or upgraded version of what they intend to buy (Correct answer)
- Selling products at a discount to clear inventory
- Providing free samples to attract new customers
Correct answer: Encouraging a customer to purchase a higher-end or upgraded version of what they intend to buy
Upselling persuades customers to buy a premium product or upgrade, increasing the transaction value while ideally delivering more value to the customer.
Question 7: Which of the following is an example of proactive customer service?
- Responding to a complaint after it is submitted
- Waiting for customers to call with questions
- Notifying customers of a product delay before they discover it themselves (Correct answer)
- Offering a refund only when a customer demands it
Correct answer: Notifying customers of a product delay before they discover it themselves
Proactive customer service involves anticipating customer needs and communicating potential issues before customers are affected, building trust and reducing frustration.
ESB Customer Relationship Management 2
What is 'customer segmentation' in CRM?