Curled Metal, Inc. (CMI) is trying to determine which market segment to target with its new...

 

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Curled Metal, Inc. (CMI) is trying to determine which market segment to target with its new cushion pads for pile-drivers. It has narrowed its potential customers down to two segments: (1) large international construction companies ("Hugo") and (2) smaller, independent pile-driving contractors ("Petino"). Given the following projections, what's the customer lifetime value (CLV) for Hugo and Petino, respectively? Acquisition cost Annual revenue Gross margin% Retention rate Interest rate for discounting Number of years over which the customer relationship is assessed Hugo $150,000 $400,000 40% 90% 10% 3 Petino $17,500 $50,000 50% 75% 10% 3 2. What's the three-year customer lifetime return on investment (CLROI) for Hugo and Petino, respectively? 3. What would the CLROI be for Hugo and Petino if CMI decided to use an infinite time horizon when estimating the value of potential customers? 4. Assuming that the conversion rate (i.e., the percentage of all customers that you're able to acquire) for pile drivers is 5%, what customer equity should you expect from each segment if there are 20 potential customers in the Hugo segment and 300 potential customers in the Petino segment (assuming an infinite time horizon)? Curled Metal, Inc. (CMI) is trying to determine which market segment to target with its new cushion pads for pile-drivers. It has narrowed its potential customers down to two segments: (1) large international construction companies ("Hugo") and (2) smaller, independent pile-driving contractors ("Petino"). Given the following projections, what's the customer lifetime value (CLV) for Hugo and Petino, respectively? Acquisition cost Annual revenue Gross margin% Retention rate Interest rate for discounting Number of years over which the customer relationship is assessed Hugo $150,000 $400,000 40% 90% 10% 3 Petino $17,500 $50,000 50% 75% 10% 3 2. What's the three-year customer lifetime return on investment (CLROI) for Hugo and Petino, respectively? 3. What would the CLROI be for Hugo and Petino if CMI decided to use an infinite time horizon when estimating the value of potential customers? 4. Assuming that the conversion rate (i.e., the percentage of all customers that you're able to acquire) for pile drivers is 5%, what customer equity should you expect from each segment if there are 20 potential customers in the Hugo segment and 300 potential customers in the Petino segment (assuming an infinite time horizon)?

Answer rating: 100% (QA)

To calculate the Customer Lifetime Value CLV and Customer Lifetime Return on Investment CLROI we can ... View the full answer