5 Customer Relationship Marketing 55.1 Using the data provided, estimate how customer profitability and lifetime value change for the mass personalization programit the customer retention dropped from 67 to 10 percent 5.5.2 Al what level of percent margin would the mass-customization program no longer produce a positive customer profit? Analysis Scale Segment Average Mass Personalization Mass Customization Annual Customer Performance Revenue per Customer Percent Margin Gross Profit per Customer Customer Relationship Mgmt 1500 1000 $ 1000 1200 40 40% 50 60 % $400 $400 $600 $900 Aquisition Cost 500 500 5 500 500 Retention Cost 100 s 150 200 250 Customer Profits $300 $250 $400 $650 Customer Retention 60 % 67 75 % 80 Customer Life (years) 2.50 3.03 4.00 5.00 Discount Rate 20% 20% 20% 20% Customer Cash Flow Year Cash Flow Cash Flow -500 Cash Flow Cash Flow 0 si -500 -500 -500 1 300 250 $ 400 650 2 $ 300 250 400 650 3 150 250 400 650 4 400 650 5 650 si Customer Cash Flow Year Cash Flow Cash Flow Cash Flow Cash Flow 0 -500 -500 s $ -500 -500 1 300 s 250 400 650 2 300 250 S 400 650 3 $ 150 250 400 650 4 $ si 5 400 650 5 650 6 S 7 $ 8 9 10 Lifetime Value $45.14 $26.62 $535.49 $1,443.90 Starting Data Scale Segment Average Mass Personalization Mass Customization Customer Relationship Mgmt 1000 1000 1200 Annual Customer Performance Revenue per Customer Percent Margin Gross Profit per Customer 1500 40 40 % 50 60 % $400 $400 $600 $900 Aquisition Cost 500 500 $ 500 500 $ s Retention Cost 100 150 s 200 250 Segment Average Mass Personalization Mass Customization Annual Customer Performance Revenue per Customer Percent Margin Gross Profit per Customer $1000 Customer Relationship Mgmt 1500 1000 1200 40 % 40 % 50 60 % $400 $400 $600 $900 500 500 500 500 Aquisition Cost Retention Cost Customer Profits $ $ 100 150 200 250 $300 $250 $400 $650 60 67 Customer Retention Customer Life (years) 75 80 2.50 3.03 4.00 5.00 20% 20x 20% 20% Discount Rate Customer Cash Flow Year Cash Flow Cash Flow Cash Flow Cash Flow -500 0 -500 -500 -500 1 300 250 400 650 2 300 250 400 650 3 150 250 400 650 4 400 650 5 650 6 S 7 S 8 9 10 Retention Cost 100 150 200 Customer Profits 250 $300 $250 $400 $650 Customer Retention Customer Life (years) 60 % 67 % 75 % 80 % 2.50 3.03 4.00 5.00 Discount Rate Customer Cash Flow 20% 20% 20% 20% Year Cash Flow Cash Flow Cash Flow Cash Flow 0 -500 -500 -500 -500 1 300 250 400 650 2 300 250 $ 400 $ 650 3 150 250 S 400 650 4 400 $ 650 5 $ $ 650 6 7 8 9 10 S Lifetime Value $45.14 $26.62 $535.49 $1,443.90 5 Customer Relationship Marketing 55.1 Using the data provided, estimate how customer profitability and lifetime value change for the mass personalization programit the customer retention dropped from 67 to 10 percent 5.5.2 Al what level of percent margin would the mass-customization program no longer produce a positive customer profit? Analysis Scale Segment Average Mass Personalization Mass Customization Annual Customer Performance Revenue per Customer Percent Margin Gross Profit per Customer Customer Relationship Mgmt 1500 1000 $ 1000 1200 40 40% 50 60 % $400 $400 $600 $900 Aquisition Cost 500 500 5 500 500 Retention Cost 100 s 150 200 250 Customer Profits $300 $250 $400 $650 Customer Retention 60 % 67 75 % 80 Customer Life (years) 2.50 3.03 4.00 5.00 Discount Rate 20% 20% 20% 20% Customer Cash Flow Year Cash Flow Cash Flow -500 Cash Flow Cash Flow 0 si -500 -500 -500 1 300 250 $ 400 650 2 $ 300 250 400 650 3 150 250 400 650 4 400 650 5 650 si Customer Cash Flow Year Cash Flow Cash Flow Cash Flow Cash Flow 0 -500 -500 s $ -500 -500 1 300 s 250 400 650 2 300 250 S 400 650 3 $ 150 250 400 650 4 $ si 5 400 650 5 650 6 S 7 $ 8 9 10 Lifetime Value $45.14 $26.62 $535.49 $1,443.90 Starting Data Scale Segment Average Mass Personalization Mass Customization Customer Relationship Mgmt 1000 1000 1200 Annual Customer Performance Revenue per Customer Percent Margin Gross Profit per Customer 1500 40 40 % 50 60 % $400 $400 $600 $900 Aquisition Cost 500 500 $ 500 500 $ s Retention Cost 100 150 s 200 250 Segment Average Mass Personalization Mass Customization Annual Customer Performance Revenue per Customer Percent Margin Gross Profit per Customer $1000 Customer Relationship Mgmt 1500 1000 1200 40 % 40 % 50 60 % $400 $400 $600 $900 500 500 500 500 Aquisition Cost Retention Cost Customer Profits $ $ 100 150 200 250 $300 $250 $400 $650 60 67 Customer Retention Customer Life (years) 75 80 2.50 3.03 4.00 5.00 20% 20x 20% 20% Discount Rate Customer Cash Flow Year Cash Flow Cash Flow Cash Flow Cash Flow -500 0 -500 -500 -500 1 300 250 400 650 2 300 250 400 650 3 150 250 400 650 4 400 650 5 650 6 S 7 S 8 9 10 Retention Cost 100 150 200 Customer Profits 250 $300 $250 $400 $650 Customer Retention Customer Life (years) 60 % 67 % 75 % 80 % 2.50 3.03 4.00 5.00 Discount Rate Customer Cash Flow 20% 20% 20% 20% Year Cash Flow Cash Flow Cash Flow Cash Flow 0 -500 -500 -500 -500 1 300 250 400 650 2 300 250 $ 400 $ 650 3 150 250 S 400 650 4 400 $ 650 5 $ $ 650 6 7 8 9 10 S Lifetime Value $45.14 $26.62 $535.49 $1,443.90