Please answer question 3

. Show your calculation.

In 2021, XYZ Auto Insurance ran a marketing campaign consisting of television commercials and mailings to prospective customers. The cost of airing TV commercials on local TV stations was estimated to be $2 per viewer, and the cost of sending out a promotional mail to a prospect was approximately $3. The industrys average acquisition rate from a comparable marketing campaign is 1%. The company sought to add 5,000 customers to its current 100,000 customers.

By the end of 2021, the company spent $500,000 more than the total expected budget (total estimated acquisition cost) and could only gain 3,000 new customers. On the other hand, the company lost 500 customers every month during the same period. Simultaneously, the company boosted its annual customer maintenance expenditure by $1,000,000 to $5,000,000 in an effort to enhance customer care for its existing customers.

The average annual insurance premium for a newly acquired customer is roughly $500 per year, and the average interest rate that XYZ pays to its principal bank, Delta, is 5%.

Q1. What is the CLV of an average customer acquired in 2021 for the next five (5) years?

(To answer this question, one should calculate the number of targeted prospects and the total estimated acquisition cost.)

Q2. For XYZ to make a profit, at least how long must a customer be kept?

Q3. XYZs strategic goal is to improve a customers CLV and improve the firms profits. What will specific tactical moves allow XYZ to achieve its goals? And why?

(When answering this question, change some parameters of your calculation, and compare it with the calculation in Q1.)