Question 1 What is the lifetime value of a typical customer in each of the four segments, in current dollar values? Compare these figures to the “Gross margin” figures in the original spreadsheet. What can you learn from this comparison?
Solution 1
Following are the lifetime value of a typical customer in each of the four segments, in current dollar values.
Segments / Segment description Customer lifetime value Gross margins
Large accounts $78,454 $63,000
Large accounts, rebate $70,769 $36,000
Small accounts $10,679 $10,800
Small accounts, rebate $10,919 $7,200
Lost customers $0 $0
The interesting thing that comes out when comparing the lifetime value of Customer and Gross margins for various Segments is that Customer…show more content… Solution 4
The following suggestions were made by Nadia Morel.
Segments / Segment description Number of Customers Approached Customers Acquired After proposal Pre Sales Cost per Customer New Account Costs
Large accounts 100 20 $7,000 $20,000
Large accounts, rebate 100 35 $7,000 $20,000
Small accounts 100 25 $1,500 $3,000
Small accounts, rebate 100 40 $1,500 $3,000
The table below illustrates the gross cost to acquire new customer in each segment. Also shown is the Customer Life time Value of Customers in each segment with 35% Discount rate ( Computed Previously for Q3). Also calculated is the percentage Profit over lifetime, which is calculated as percentage of money over Gross Cost to acquire a particular type of account.
%Profit over lifetime = (A – B)/B *100
Where
A is Customer life time Value and
B is Gross Cost to acquire per customer
Segments / Segment description Number of Customers Approached Customers acquired after proposal Gross Cost to acquire per account Gross Pre Sales Cost Gross New Account Costs Customer lifetime value Total CLV for Acquired Customers %Profit over lifetime
Large accounts 100 20 $55,000 $700,000 $400,000 $56,291 $1,125,823 2.35%
Large accounts, rebate 100 35 $40,000 $700,000 $700,000 $44,878 $1,570,732 12.20%
Small accounts 100 25 $9,000 $150,000 $75,000 $8,033 $200,817 10.74%
Small accounts, rebate 100 40 $6,750 $150,000 $120,000 $7,413 $296,514 9.82%
