price sensitive than other customers. It is true that when there are start-up costs, such as credit checks, involved in serving a new customer, the costs exceed those of serving a repeat customer. However, it is not at all clear why the costs of serving a highly loyal customer should in principle be different from those of serving any other type of repeat customer. The key variables driving cost are size and type of order, special versus standard order, and so on, not high-loyalty versus divided-loyalty customers. As for price sensitivity, highly loyal customers may in fact come to expect a price discount as a reward for their loyalty. PREP2012-Pack1-RC-004-01 VRC000108-01 Medium The primary purpose of the passage is to
A. question the notion that customer loyalty programs are beneficial
B. examine the reasons why many customers buy multiple brands of products
C. propose some possible alternatives to customer loyalty programs
D. demonstrate that most customers are not completely loyal to any one brand of product or
service
E. compare the benefits of customer loyalty programs with those of other types of purchase
incentive programs
PREP2012-Pack1-RC-004-02 VRC000108-02 Easy
The passage mentions each of the following as a potential reason for customers’ divided loyalty EXCEPT
A. a particular brand may be the only one available
B. a particular brand may be offered at a discount
C. customers will often buy multiple brands out of a desire for variety
D. customers will often buy an unfamiliar brand when it is new on the market
E. customers will often buy certain brands for certain occasions
PREP2012-Pack1-RC-004-03 VRC000108-03 Easy
According to the passage, advocates of customer loyalty programs claim which of the following about highly loyal customers?
A.
B.
C.
D.
E. They often expect price discounts as a reward for their loyalty to a product. They can be served at lower expense to a company than can nonloyal customers. They tend to be light but predictable buyers of the product or service in question. They are to try out new brands or products that appear on the market. They are difficult to differentiate statistically from other types of repeat customers. PREP2012-Pack1-RC-004-04 VRC000108-04 Easy
The passage suggests that companies that invoke the “80/20" principle in support of customer loyalty programs which of the following