1. ScentGift is a subscription perfume company that offers customer packages to try perfumes/colognes per month....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. ScentGift is a subscription perfume company that offers customer packages to try perfumes/colognes per month. It has three packages for sale: GoGetter (1 scent), Magnet (2 scents), and Slay (4 scents). The marketing team expects customers will buy them in sales mix ratio of 5:8:2. The package prices are $20, $35, $60, respectively. The variable costs for the packages are $7, $12, and $18, respectively. They anticipate the ad campaign they need to run will cost around $3M. a. How many treatments of each type do they need to sell in order to breakeven? [3] b. Assume that they could get a total of 650,000 customers with the marketing budget mentioned above, and they can achieve retention rates in the three segments of 86%, 70%, and 67%, respectively. Using a monthly discount rate of 6%, please calculate the CLV for each segment. (Hint: M= total contribution for each segment from part a. AC= FC/total number of customers) (Note: Just use the same AC for each segment) [6] CLV = Mr (1+d-r) T= -AC - c. Suppose that next year they have $2M in their marketing budget that they can spend on one of the three segments. Help them decide by calculating what the retention rate target should be for each segment if the entire $2M is spent on that segment. (Hint: Rearrange the formula in terms of r, and calculate the new M. To find the size of each segment, use the sales mix, e.g. Slay would be 5/15 of the total number of customers.) [3] (CLV + AC)(1+d) (M+CLV + AC) d. If they instead spend that $2M on advertising to 100,000 households in their highest CLV segment, how many new customers would they need to acquire to breakeven? (Hint: Use the CLV from part b). [2] Breakeven Acquisition Rate = Acquisition Spending CLV e. They expect that after the first year they will be able to increase margins from their original batch of customers (part b) year to year by 4%, 6%, 2%, respectively. Please recalculate the CLV for each segment. Assume that the AC is a sunk cost (they have already broken even on that original batch). In other words, calculate it without AC. [6] 1. ScentGift is a subscription perfume company that offers customer packages to try perfumes/colognes per month. It has three packages for sale: GoGetter (1 scent), Magnet (2 scents), and Slay (4 scents). The marketing team expects customers will buy them in sales mix ratio of 5:8:2. The package prices are $20, $35, $60, respectively. The variable costs for the packages are $7, $12, and $18, respectively. They anticipate the ad campaign they need to run will cost around $3M. a. How many treatments of each type do they need to sell in order to breakeven? [3] b. Assume that they could get a total of 650,000 customers with the marketing budget mentioned above, and they can achieve retention rates in the three segments of 86%, 70%, and 67%, respectively. Using a monthly discount rate of 6%, please calculate the CLV for each segment. (Hint: M= total contribution for each segment from part a. AC= FC/total number of customers) (Note: Just use the same AC for each segment) [6] CLV = Mr (1+d-r) T= -AC - c. Suppose that next year they have $2M in their marketing budget that they can spend on one of the three segments. Help them decide by calculating what the retention rate target should be for each segment if the entire $2M is spent on that segment. (Hint: Rearrange the formula in terms of r, and calculate the new M. To find the size of each segment, use the sales mix, e.g. Slay would be 5/15 of the total number of customers.) [3] (CLV + AC)(1+d) (M+CLV + AC) d. If they instead spend that $2M on advertising to 100,000 households in their highest CLV segment, how many new customers would they need to acquire to breakeven? (Hint: Use the CLV from part b). [2] Breakeven Acquisition Rate = Acquisition Spending CLV e. They expect that after the first year they will be able to increase margins from their original batch of customers (part b) year to year by 4%, 6%, 2%, respectively. Please recalculate the CLV for each segment. Assume that the AC is a sunk cost (they have already broken even on that original batch). In other words, calculate it without AC. [6]
Expert Answer:
Answer rating: 100% (QA)
a To calculate the number of treatments of each type needed to breakeven we need to determine the contribution margin per treatment for each package Contribution margin Package price Variable cost per ... View the full answer
Related Book For
Accounting Principles
ISBN: 978-1119048503
7th Canadian Edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
Posted Date:
Students also viewed these accounting questions
-
With a 70 percent customer retention rate (average for most U.S. firms according to the American Management Association) every $1 million of business in 2005 will grow to more than $4 million by the...
-
With a 70 percent customer retention rate (average for most U.S. firms according to the American Management Association) every $1 million of business in 1995 will grow to more than $4 million by the...
-
Get Real Inc. has announced that it will buy back 3,000,000 of its 27,000,000 shares over the next year. If the stock is selling for $15.30, what is the equivalent cash dividend that the company...
-
Prepare an Orientation Plan for the select position utilizing the theories discussed in the text. Discuss appropriate and effective orientation plans and your decision-making process for selecting a...
-
Fultz Corporation is projecting a cash balance of $31,000 in its December 31, 2010, balance sheet. Fultzs schedule of expected collections from customers for the first quarter of 2011 shows total...
-
Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio (in ratio form: Kendra, 3/6; Cogley, 2/6; and Mei, 1/6). The partners have decided to liquidate their partnership. On the day of...
-
Use the pain tolerance ratings (PainTolerance) after the activity to estimate the difference in mean pain tolerance between those who just completed a synchronized activity and those who did a...
-
IPort Products makes cases for portable music players in two processes, cutting and sewing. The cutting process has a capacity of 100,000 units per year; sewing has a capacity of 120,000 units per...
-
a. What resources are shared among different threads in a multithreaded process? (10 points) b. Describe two differences between user-level and kernel-level threads. In what circumstances is one...
-
Details of a company's insurance policy are shown below: Premium for year ended 31 March 2008 paid April 2007 Premium for year ending 31 March 2009 paid April 2008 $25,920 $28,800 What figures should...
-
A 2.0 cal/s heater is submerged in a 1.0-liter beaker full of water for 10 min. What is the temperature rise if all the heat goes into raising the temperature of the water?
-
Is it a good idea to replace higher-paid workers with lower-paid workers to ensure the success of a company?
-
A structural square post (16 cm x 16 cm) supports a compressive load of 245,000 N. Determine the factor of safety if the post is made of Southern pine with a compressive yield strength of 40 MPa.
-
The inside dimensions of a bungalow style house are 10m x 15 m and it has a full basement ( same inside measurements as main floor). The following loads are found in this occupancy: 15 kw range, 4 kw...
-
Assuming a voltage of 240v (standard in Canada), the total load in amps = 171.64 kw / 0.24 kv = 715.17 A, what wire size would be needed and why.
-
1. A block of cement with mass 34.8 lb rests on an area of 64.0 in. Calculate the pressure in Pa exerted by the block. Also, convert the pressure to atmospheres. 2. The weather report says the...
-
Estimate the most current Cost of Debt and Total Market Value of Debt of Walmart Inc (ticker: WMT). Suggested sources of the data: SEC's Edgar database - for financial statements and annual or...
-
Suppose you need to answer any four of seven essay questions on a history test and you can answer them in any order. a. How many different question combinations are possible? b. What is the...
-
Corus Entertainment's financial statements are presented in Appendix A of this book. Instructions (a) Based on the information contained in these financial statements, determine each of the...
-
Best First Aid offers first aid training to individuals and groups across the city. The following information is available to be used in recording annual adjusting entries for the company's October...
-
Lee Company accepts a $27,000, four-month, 6% note receivable in settlement of an account receivable on June 1, 2017. Interest is to be paid at maturity. Lee Company has a December 31 year end and...
-
One might naively think that a collection \(\left(X_{t}, t \in \mathbb{R}^{+} ight)\)of independent r.v's may be chosen "measurably," i.e., with the map \[\left(\mathbb{R}^{+} \times \Omega,...
-
Chi-squared Law. A noncentral chi-squared law \(\chi^{2}(\delta, \alpha)\) with \(\delta\) degrees of freedom and noncentrality parameter \(\alpha\) has the density \[\begin{aligned}f(x ; \delta,...
-
If \(X\) is a positive random variable, prove that its negative moments are given by, for \(r>0\) : (a) \(\quad \mathbb{E}\left(X^{-r} ight)=\frac{1}{\Gamma(r)} \int_{0}^{\infty} t^{r-1}...
Study smarter with the SolutionInn App