Marketing-Customer Lifetime Value Assignment

QUESTION

Customer Lifetime Value AssignmentDue on 18th November at 1.30 pmInstructions1. The total points for this assignment is 10. The points for each question are shownnext to it. Please answer concisely and to the point.2. Please show your calculations as well as the numerical answer for each question.If you just write the answers without showing how you arrived at them, you maynot get the full points.3. If your logic is correct, but the numerical calculations are wrong, you will getpartial credit.Scenario 1Professor Yoganarasimhan has decided to join a hiking club. The club charges amembership fee of $25 per year. The membership entitles Professor Yoganarasimhan tojoin 4 hikes a year, which she utilizes to the maximum. During a hike, she usually buyssome hiking equipment and a sports drink from the club. On average, she spends $50during each hike with the club and the cost of providing the required products runs toabout $20 for the club. The club has a zero discount rate and loses about 30% of itscustomers a year.Answer the questions sequentially, and keep adding the new information given in eachquestion to the next one.1. What is Professor Yoganarasimhan’s CLV for the club? (1 POINT)2. As part of the promotion to get new members, the club conducted a free hike andprovided food, drinks, and equipment. The free hike attracted 10 hikers (one ofwhich is Professor Yoganarasimhan) and cost the club $250 to conduct. They alsosend her flyers and mails that cost $6 a year. With these costs added in, what isher new CLV? (1 POINT)3. During a hike, Professor Yoganarasimhan meets the CEO of the club, andmentions to him that zero discount rates are not reasonable, and that the marketdiscount rate is about 10%. Assuming the same costs described above, what is theCLV that the CEO should assign to Professor Yoganarasimhan? (Assume thesame costs are same as that given in question 2.) (1 POINT)4. After sharing this information, Professor Yoganarasimhan is so lost in thinkingabout CLV that she slips and falls down during a difficult turn, which the hikingguide didn’t warn her about. She is very upset and tells the club that she is leavingunless she is compensated. What is the maximum amount the club should bewilling to pay out to retain Professor Yoganarasimhan? (Assume the same costsand interest rate are same as that given in questions 2 and 3.) (1 POINT)Scenario 25. A firm operating in a market with one another firm retain 55% of its customersand acquires 90% of its competitor’s customers. What is the long run marketshare of this firm? (2 POINTS)Scenario 3Assume interest rate is zero. You have identified two types of customers. Customers oftype A give you a per-period profit margin of $40. Your retention rate for type Acustomers is .8. Customers of type B give you a per-period profit margin of $75. Yourretention rate for type B customers is .4.6. What is the absolute CLV for type A consumers in the scenario described above?(The absolute CLV ignores acquisition costs.) (1 POINT)7. What is the absolute CLV for type B consumers in the scenario described above?(The absolute CLV ignores acquisition costs.) (1 POINT)8. Imagine you could run a marketing campaign targeting only type B customers toenhance your relationship with them and boost the per-period profit margin to$100? What is the maximum amount of money that you could spend on thismarketing campaign and have it earn you the same as not running the campaign(in which case your per-period profit stays $75). Assume there are 10 type Bcustomers. (2 POINTS)

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