Looking at the data used to setup your SyPhone analysis (shown below), you notice that the gross margin ($) for large accounts exceeds the gross margin ($) for large accounts with a rebate by a whopping 75%. Yet the CLV of a large account is only 33% more than the CLV for a large account with a rebate. What explains this difference (i.e., large accounts with a rebate are more profitable from a CLV perspective than if we look at gross margin ($) alone)? Segment description Large accounts Large accounts, rebate Small accounts Small accounts, rebate Lost customers Transition matrix Number of customers Gross margins ($) Marketing costs, next period ($) 5000 4000 1500 1000 0 Large accounts Large accounts, rebate Small accounts Small accounts, rebate Lost customers *Segment labels and number of customers currently in each segment. Gross margins relate to current period, while marketing costs are anticipated expenses for next period based on current segment membership. 55 0 500 2000 5000 7500 0 0 $ 0 0 X Large accounts Large accounts, rebate Small accounts Small accounts, rebate Lost customers 10 0 75 0 63000 36000 10800 7200 0 0 0 0 X 0 58 0 0 0 2 70 35 25 40 30 100 1 * Percent of customers moving from one segment (left column) to another (top row) at each period. Each row must sum to 100, The very last segment represents customers who are assumed to be lost forever. There are 4 times as many large accounts with a rebate as their are large accounts without a rebate. The rebate is only $100 per account. Large accounts with a rebate are more likely to become small accounts, where they become more profitable despite producing less revenue. Large accounts with a rebate are more likely to remain in that category for multiple periods where as large accounts without a rebate are less likely to remain in that category and are more likely to become "Lost customers" in the next period.

Looking at the data used to setup your SyPhone analysis (shown below), you notice that the gross margin (\$) for large accounts exceeds the gross margin (\$) for large accounts with a rebate by a whopping 75% Yet the CLV of a large account is only 33% more than the CLV for a large account with a rebate What explains this ditference (i.e. large accounts with a rebate are more profitable from a CLV perspective than if we lock at gross margin (\$) alonel? "herem There are 4 times as many large accounts with a rebate as their are large accounts without a rebate. The rebate is only $100 per account. Large accounts with a rebate are more likely to become small accounts, where they become more profitable despite producing less revenue. Large accounts with a rebate are more likely to remain in that category for multiple periods where as large accounts without a rebate are less likely to remain in that catesory and are more likely to become "Lost customers" in the next period