Customer Data Analytics Final Exam
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Customer Lifetime Value - CORRECT ANSWER the net present value of the profit
that you will realize on the average new customer during a given number of years
Why use LTV? - CORRECT ANSWER assess the value of one's customer base
segment customers based on financial value
compare costs of acquisition
assess past marketing actions (e.g. promotions, customer service, etc.)
predict the future! We can perform "What If" analyses of future marketing actions
Building Blocks of CLV - CORRECT ANSWER acquisition costs
profits over time period of relationship
present value
retention rate
Customer Acquisition Costs - CORRECT ANSWER all costs expended to acquire new
customers divided by the actual number of new customers acquired
Total Campaign Costs/Customers Acquired
Acquisition Cost (2nd formula) - CORRECT ANSWER cost to mail a catalog + access
a name/ response rate
Discount Rate - CORRECT ANSWER future money is discounted for many reasons:
interest rates and opportunity costs
potential risks(interest rate fluctuations, competition, changes in marketplace, etc. )
, Discount Rate Formula - CORRECT ANSWER d= (1+(interest rate * risk factor))^t
Retention - CORRECT ANSWER the purpose of business is to create and keep a
customer... all other truths on the subject are merely derivative
How to Improve CLV? - CORRECT ANSWER lower contact costs, pursue customers
or channels with better response rates
lengthen relationships, market higher margin items, raise prices, increase size of purchase,
increase frequency, decrease cost of service
pursue more favorable financing, mitigate risks
develop loyalty program. improve satisfaction
Types of predictive models - CORRECT ANSWER non-statistical: heuristics, Rules of
thumb, Ex: RFM
Statistical: Analyst-driven (Ex: Linear Regression, Logistic Regression)
Data-driven (Ex: Decision Trees, Neural Networks)
Correlation Coefficient - CORRECT ANSWER -1 indicates perfect negative
correlation
+1 indicates perfect positive correlation
0 indicates no correlation either way
Linear correlation - CORRECT ANSWER relation between two variables that shows
up on a scatterplot as the dots roughly following a straight line
Curvilinear correlation - CORRECT ANSWER relation between two variables that
shows up on a scatterplot as dots following a systematic pattern, but in a curved line rather
than a straight line
UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Customer Lifetime Value - CORRECT ANSWER the net present value of the profit
that you will realize on the average new customer during a given number of years
Why use LTV? - CORRECT ANSWER assess the value of one's customer base
segment customers based on financial value
compare costs of acquisition
assess past marketing actions (e.g. promotions, customer service, etc.)
predict the future! We can perform "What If" analyses of future marketing actions
Building Blocks of CLV - CORRECT ANSWER acquisition costs
profits over time period of relationship
present value
retention rate
Customer Acquisition Costs - CORRECT ANSWER all costs expended to acquire new
customers divided by the actual number of new customers acquired
Total Campaign Costs/Customers Acquired
Acquisition Cost (2nd formula) - CORRECT ANSWER cost to mail a catalog + access
a name/ response rate
Discount Rate - CORRECT ANSWER future money is discounted for many reasons:
interest rates and opportunity costs
potential risks(interest rate fluctuations, competition, changes in marketplace, etc. )
, Discount Rate Formula - CORRECT ANSWER d= (1+(interest rate * risk factor))^t
Retention - CORRECT ANSWER the purpose of business is to create and keep a
customer... all other truths on the subject are merely derivative
How to Improve CLV? - CORRECT ANSWER lower contact costs, pursue customers
or channels with better response rates
lengthen relationships, market higher margin items, raise prices, increase size of purchase,
increase frequency, decrease cost of service
pursue more favorable financing, mitigate risks
develop loyalty program. improve satisfaction
Types of predictive models - CORRECT ANSWER non-statistical: heuristics, Rules of
thumb, Ex: RFM
Statistical: Analyst-driven (Ex: Linear Regression, Logistic Regression)
Data-driven (Ex: Decision Trees, Neural Networks)
Correlation Coefficient - CORRECT ANSWER -1 indicates perfect negative
correlation
+1 indicates perfect positive correlation
0 indicates no correlation either way
Linear correlation - CORRECT ANSWER relation between two variables that shows
up on a scatterplot as the dots roughly following a straight line
Curvilinear correlation - CORRECT ANSWER relation between two variables that
shows up on a scatterplot as dots following a systematic pattern, but in a curved line rather
than a straight line
