Question: Each column shows the values for a typical customer in each class (constant over the lifetime of the customer). The annual retention probability applies only

Each column shows the values for a typical customer in each class (constant over the lifetime of the customer). The annual retention probability applies only after the first year. That is, no one defects until after a full year of patronizing Starbucks.

Silver Gold Platinum

VISITS/MONTH 3.9 5.1 7.2

REVENUE PER VISIT $3.88 $4.06 $4.62

ANNUAL RETENTION PROBABILITY 0.30 0.55 0.70

a. Assume that Starbucks' gross margin is 40% and that its (one-time) customer acquisition cost is $100. Further assume that Starbucks uses a discount rate of 10%. What is the 5-year individual customer CLV for each class of customer? Show your work on an Excel spreadsheet.

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