ITPEC IP October 2018 Question 81
In the planning of the business strategy of a retail business, “retention of loyal customers” is set as the CSF (Critical Success Factor). Which of the following is the most appropriate analysis that is used for evaluating the achievement level of the CSF?
Explanation
RFM analysis by customer — retaining loyal customers is measured customer by customer, from what each one keeps buying.
RFM analysis scores every customer on three values from the purchase history: Recency (how recently they last bought), Frequency (how often they buy) and Monetary (how much they spend). Loyal customers score high on all three. Tracking how many customers stay in the top ranks, and who slips down because their last purchase is getting old, shows directly whether the CSF "retention of loyal customers" is being achieved.
Answer (a)
Why not others:
- •(b) — the demographics of new customers describe who is being acquired, not whether existing customers keep coming back
- •(c) — POS analysis of new products measures how the products sell, not how customers behave over time
- •(d) — ABC analysis ranks stores and products by their share of sales; it contains no customer, so it cannot show loyalty
Key rule: A CSF is checked with a measure of the same thing it names: a customer-retention goal needs customer-level data such as RFM, not product or store rankings.
Business Strategy Management · AI-written, may contain errors
This question comes from an official ITPEC past paper. ITPEC Practice is an independent study tool and is not affiliated with ITPEC. See the official IP past-paper collection or Report an issue.