What is the average value of a loyal customer (VLC) in a target market

QUESTION

What is the average value of a loyal customer (VLC) in a target market segment if the average purchase price is $75 per visit, the frequency of repurchase is 6 times per year, the contribution margin is 10 percent, and the average customer defection rate is 25 percent? Due to better operations and s
VLC at 25% defection rate: Average purchage price = $75Frequency of repurchase = 6 times per year (6/365* 100 = 1.64)Contribution margin per year = 10%Average customer defection rate = 25%BLC = 1 / 25% OR (1 / 0.25) VLC = (Price) (RF) (CM) (BLC) = ($75) (1.64) (0.1) (1/0.25) VLC = $49.31 VLC at 20% defection rate: Customer defection rate = 20%BLC = 1/20% OR (1/0.2)Average purchage price = $75Frequency of repurchase = 6 times per year (6/365* 100 = 1.64)Contribution margin per year = 10%VLC =

e) (RF) (CM) (BLC) = ($75) (1.64) (0.1) (1/0.2) VLC = $61.5 VLC at 15% defection rate: Customer defection rate = 15%BLC = 1/15% OR (1/0.15)Average purchage price = $75Frequency of repurchase = 6 times per year (6/365* 100 = 1.64)Contribution margin per year = 10%VLC = (Price) (RF) (CM) (BLC) = ($75) (1.64) (0.1) (1/0.15) VLC = $82.0

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