Value of a Loyal Customer

Conceptual Overview: Explore components that determine the value of a loyal customer.

Maintaining customer loyalty, especially if repurchases are frequent, can obviously increase profitability. The value of a loyal customer $($VLC$)$ is the product of the revenue per unit $(P),$ the contribution margin to profit and overhead expressed as a fraction $($CM$),$ repurchase frequency $($RF$,$ probabity is als the Buyer's Life by the defection rate $(DR).$ The inverse of defection rate $(\frac{1}{D}R)$ is also is:

$is$: $VLC=P^{**}CM{M}^{**}R\frac{F}{D}R=P^{**}C{M}^{**}R{F}^{**}BLC.$

The graph below shows the VLC as a function of the defection rate. Drag on the graph to change the defection rate DR and observe how the VLC changes. For example; see how much VLC would change if the defection rate dropped from $0\mathrm{.}4$ to $0\mathrm{.}2.$ Use the sliders to change either CM or RF and observe how the VLC curve changes.

$3,000$