Cool Beans is a locally owned coffee shop that competes with two large coffee chains, PlanetEuro and Frothy. Alicia, the owner, is considering two different marketing promotions and thinks that CLV analysis will help her decide the best course of action. An average specialty coffee drink sells for $4.20and has a margin of 76%. One promotion is providing loyalty cards to her regular customers that would give them one free specialty coffee drink after 10 regular purchases. Alicia estimates that this will increase the frequency of their purchases by 18%. Currently, her customers average buying 2 specialty drinks per week. The second promotion is targeted at new customers. She would offer a free specialty drink to incoming college freshmen by providing a coupon with their orientation packages. Because of her location near the college, she expects that 470 students will come to Cool Beans for a free trial. Of those, she anticipates that 18% will become regular customers who will purchase at least one specialty drink each week. The cost of printing and distributing the coupons is $115.

What is the CLV of a customer over the time horizon of one year prior to the introduction of the loyalty program?

Answer rating: 100% (QA)

Answer Solution Calculation of CLV peos to introducti... View the full answer