1. What does Customer Lifetime Value (CLV) primarily measure?
A) Short-term profitability
B) The value of customer satisfaction
C) Long-term profitability of a customer
D) Immediate sales revenue
Answer: C
2. Which component is NOT typically considered when calculating CLV?
A) Acquisition cost
B) Retention rate
C) Discount rate
D) Competitor’s market share
Answer: D
3. The formula for simplified Customer Lifetime Value is:
A) Margin × Retention rate
B) Margin × (Retention rate / [1 + Discount rate – Retention rate])
C) Retention rate – Acquisition cost
D) Margin × Acquisition cost
Answer: B
4. Higher customer retention rates generally result in:
A) Lower CLV
B) No change in CLV
C) Higher CLV
D) Higher acquisition costs
Answer: C
5. A “discount rate” used in CLV calculation primarily accounts for:
A) Inflation
B) Immediate profits
C) Time value of money
D) Customer churn
Answer: C
6. Increasing customer churn rates typically:
A) Increase CLV
B) Decrease CLV
C) Have no impact on CLV
D) Stabilize CLV
Answer: B
7. If annual margin per customer is $100 and retention rate is 80%, increasing retention rate will:
A) Decrease CLV
B) Increase CLV
C) Not affect CLV
D) Reduce acquisition costs
Answer: B
8. Acquisition costs in CLV calculations are:
A) Added to customer profits
B) Subtracted from total customer profits
C) Ignored completely
D) Multiplied by retention rate
Answer: B
9. Negative Customer Lifetime Value means:
A) Customer generates losses over time
B) Customer generates profits immediately
C) High long-term customer retention
D) Lower discount rates
Answer: A
10. Retention rate in CLV calculation indicates:
A) Percentage of new customers
B) Percentage of customers retained each year
C) Cost of retaining customers
D) Immediate revenue from a customer
Answer: B
11. Which factor directly increases CLV?
A) Higher churn rates
B) Higher acquisition costs
C) Higher retention rates
D) Lower customer margins
Answer: C
12. CLV calculations typically use historical customer data to:
A) Predict future customer behavior
B) Determine product costs
C) Manage inventory
D) Reduce employee turnover
Answer: A
13. Companies use CLV primarily to:
A) Evaluate product quality
B) Assess advertising effectiveness
C) Guide customer relationship investments
D) Determine competitor pricing
Answer: C
14. Customer Lifetime Value is highest when:
A) Customers frequently switch brands
B) Customers remain loyal over time
C) Customers buy only discounted products
D) Acquisition costs exceed profits
Answer: B
15. Which of these would increase Customer Lifetime Value?
A) Increased marketing costs without retention
B) Frequent price promotions only
C) Improving customer satisfaction
D) Decreasing retention rate
Answer: C
16. Discount rates in CLV calculation represent:
A) The cost of customer service
B) Market share growth
C) Uncertainty and time value of money
D) Immediate profits
Answer: C
17. Annual customer margin in CLV calculation is:
A) Revenue minus retention costs per customer
B) Acquisition costs plus revenue
C) Revenue minus acquisition cost
D) Total marketing expenses per customer
Answer: A
18. Which scenario results in lower CLV?
A) High profit margins, high retention
B) High acquisition cost, low retention
C) Low acquisition costs, high retention
D) High retention, low churn
Answer: B
19. CLV primarily helps marketers:
A) Ignore customer complaints
B) Target profitable customers effectively
C) Increase immediate sales only
D) Reduce customer service efforts
Answer: B
20. Improved retention rates generally have what impact on CLV calculation?
A) No effect
B) Increase CLV
C) Decrease CLV
D) Increase churn
Answer: B
21. Reducing acquisition costs directly:
A) Decreases CLV
B) Increases CLV
C) Has no impact on CLV
D) Reduces retention rates
Answer: B
22. High CLV indicates customers are:
A) Price sensitive and occasional buyers
B) Frequent buyers and brand-loyal
C) Likely to churn quickly
D) Low-margin purchasers
Answer: B
23. The primary reason companies calculate CLV is to:
A) Eliminate customer complaints
B) Allocate resources to profitable customers
C) Minimize product innovation
D) Increase short-term transactions
Answer: B
24. CLV calculations help determine:
A) Immediate marketing costs only
B) Optimal levels of investment in customer relationships
C) Competitive threats
D) Production levels
Answer: B
25. Retention costs in CLV calculation typically include:
A) Customer acquisition activities
B) Loyalty programs and service expenses
C) Competitor analysis costs
D) Internal employee costs only
Answer: B
26. Which is essential to calculate CLV accurately?
A) Customer demographics only
B) Historical purchase and retention data
C) Competitor’s pricing strategy
D) Immediate sales forecasts only
Answer: B
27. CLV decreases when:
A) Customers make repeat purchases
B) Retention rates improve
C) Acquisition costs rise without improved retention
D) Customers buy premium products
Answer: C
28. CLV is highest when customers have:
A) Short-term relationships with low profit
B) Long-term relationships with consistent profits
C) One-time large purchases
D) Frequent returns and refunds
Answer: B
29. In the CLV formula, retention rate is expressed as:
A) A percentage of customers retained annually
B) Customer complaints per year
C) Acquisition cost per customer
D) Annual price discounts
Answer: A
30. Companies segment customers based on CLV to:
A) Ignore low-profit customers entirely
B) Allocate resources efficiently to profitable segments
C) Focus only on high-churn customers
D) Minimize customer interaction
Answer: B
