****Please read the question, it is asking for the CUSTOMER LIFE TIME VALUE*****

Starbucks' customer satisfaction has been reported as high as 89%. Because of this, the company has always experienced high retention rates. They are planning to implement a new promotion campaign, aimed to reach a new target market - a customer segment they have previously neglected (i.e. 12 million people). They are expected to convert 1/3 of the market. They plan to invest 45,500,000$ on the campaign in the first year. Given that their past data indicates that it costs 40% less to keep an existing customer than to acquire a new one, they expect that their advertising campaign budget will be 40% less in year 2 (than in year 1).

Projections for Year 1 of the campaign

They expect that customers will spend approximately $5.59 per visit, and that the customer is likely to visit a Starbucks once per week. Contribution margin: 23%

Projections for Year 2 of the campaign

They expect that customers will spend approximately $6.33 per visit, and that the customer is likely to visit a Starbucks 1.5 times per week. Contribution margin: 23.7%

The marketing analytics team is optimistic about reaching a high Customer Lifetime Value with this particular market. If the customer retention rate is 60% in year 2, what is the total Customer Lifetime Value. (10 marks)