ESB Customer Relationship Management 1 — Questions and Answers
Question 1: What is the primary goal of Customer Relationship Management (CRM) for a small business?
- Reducing the cost of production
- Building and maintaining profitable long-term customer relationships (Correct answer)
- Automating all marketing activities
- Increasing the number of product lines
Correct answer: Building and maintaining profitable long-term customer relationships
CRM focuses on building long-term, profitable relationships with customers by understanding their needs and improving satisfaction.
Question 2: Which metric best measures how likely a customer is to recommend your business to others?
- Customer Acquisition Cost (CAC)
- Gross Profit Margin
- Net Promoter Score (NPS) (Correct answer)
- Return on Investment (ROI)
Correct answer: Net Promoter Score (NPS)
Net Promoter Score (NPS) asks customers how likely they are to recommend a business on a scale of 0–10, making it the standard loyalty and advocacy metric.
Question 3: A small business notices that 20% of its customers generate 80% of its revenue. This observation reflects which business principle?
- The Law of Diminishing Returns
- The Pareto Principle (80/20 Rule) (Correct answer)
- Break-even Analysis
- Economies of Scale
Correct answer: The Pareto Principle (80/20 Rule)
The Pareto Principle states that roughly 80% of effects come from 20% of causes, commonly applied to show that a small segment of customers drives most revenue.
Question 4: What does 'customer lifetime value' (CLV) represent?
- The total revenue a customer generates over the entire relationship with the business (Correct answer)
- The cost to acquire a single customer
- The average order value per transaction
- The number of years a customer has been with the business
Correct answer: The total revenue a customer generates over the entire relationship with the business
CLV is the total net revenue a business can expect from a single customer account throughout the entire business relationship.
Question 5: Which of the following is a key advantage of using CRM software in a small business?
- It eliminates the need for customer service staff
- It centralizes customer data for better communication and follow-up (Correct answer)
- It automatically increases sales prices
- It replaces the need for a marketing plan
Correct answer: It centralizes customer data for better communication and follow-up
CRM software consolidates customer information in one place, enabling better tracking of interactions and more personalized follow-up.
Question 6: A customer who had a complaint resolved quickly and satisfactorily often becomes what type of customer?
- A one-time buyer
- A price-sensitive customer
- A highly loyal advocate (Correct answer)
- An inactive customer
Correct answer: A highly loyal advocate
Research shows that customers whose complaints are resolved promptly often develop stronger loyalty than customers who never had a problem, a phenomenon called the 'service recovery paradox.'
Question 7: Which strategy involves offering existing customers additional or complementary products to increase revenue per customer?
- Cold calling
- Cross-selling (Correct answer)
- Market segmentation
- Penetration pricing
Correct answer: Cross-selling
Cross-selling encourages customers to purchase related or complementary products, increasing the average transaction value and deepening the customer relationship.
ESB Customer Relationship Management 1
What is the primary goal of Customer Relationship Management (CRM) for a small business?