Assume that customers who buy certain packages don't switch to different ones, but the probability of staying
Question:
Assume that customers who buy certain packages don't switch to different ones, but the probability of staying with Extra Tasty from month to month has been 75%, 82%, 68%, and 85%. Assuming a discount rate of 4% annually, calculate the CLV for customers in each meal plan segment. Use the total contribution for each meal plan from part (a) as the (annual) margin in each case, and remember to subtract the AC (which is the FC/customer base). [4]
Assuming frequency of repurchase (RF) in each year = 1
Defection rate (DR) = 1 - retention rate
Buyer's life cycle BLC = /DR
CLV = Profit * RF * BLC
Vegan= 960
Gluten-Free=1210.99
MeatLove = 800
Keto=1278.72
a. suppose that instead of spending the whole $300,000 on the ad buy, Extra Tasty would like to consider spending some of the funds on ads and some on coupons. Assuming that option 1) spending the $300,000 on advertising would have brought in 1,500 customers, option 2) spending $175,000 on ads, and offering a $40 coupon would draw 2,500 new customers, and option 3) spending $175,000 on ads, and offering a $30 coupon would draw 1,800 new customers:
i. Calculate the new CLV for each option :
1. $300,000 on ads
2. $175,000 on ads and a $40 coupon
3. $175,000 on ads and a $30 coupon
ii. Calculate the total segment value for those new customers for each option from part (i). (Hint: CLV * number of new customers).
