revised schedule

Topics: Customer lifetime value, Time, Mathematics Pages: 2 (310 words) Published: September 24, 2013
Alfred believes that by including a $5 dog toy with each shipment he can increase the number of purchasing customers in period 1 and each subsequent period by 25%. If this is true, what would be the new CLV? QUESTION 6: Alfred believes that by including a $5 dog toy with each shipment he can increase the number of purchasing customers in period 1 and each subsequent period by 25%. If this is true, what would be the new CLV? 0.00 is INCORRECT. Time: 0 min, 6 sec

THE ANSWER AND EXPLANATION

(50 * ($5.56 - 5) + (1.25 * 20 * (40 * 30% - $0.74 - 5)) / (1 + 0.0194) + (1.25 * 16 * ($30 * 30% - $0.74 - 5)) / pow(1 + 0.0194,2) + (1.25 * 12 * (35 * 30% - $0.74 - 5)) / pow(1 + 0.0194,3) + (1.25 * 8 * (25 * 30% - $0.74 - 5)) / pow(1 + 0.0194,4) + (1.25 * 4 * (20 * 30% - $0.74 - 5)) / pow(1 + 0.0194,5) + (1.25 * 2 * (20 * 30% - $0.74 - 5)) / pow(1 + 0.0194,6)) / 50 = $6.59 [+/- $0.20]

Use the same CLV formula to calculate, but multiply the number of customers in the forward periods by 1.25 and subtract an additional $5 for the cost of the toy for all periods.

QUESTION 5: What is the maximum amount that company should spend to acquire a new customer? 0.00 is INCORRECT. Time: 0 min, 6 sec
THE ANSWER AND EXPLANATION

$16.30 = $16.30 [+/- $0.49]

Same as CLV of an average customer, unless there is some reason to think that a new customer with have different ordering patterns.

QUESTION 4: Using the same discount rate, what is the CLV remaining for customers who have placed one initial order, but not yet ordered the second time? 0.00 is INCORRECT. Time: 0 min, 6 sec
THE ANSWER AND EXPLANATION

((20 * (40 * 30% - $0.74)) / (1 + 0.0194) + (16 * ($30 * 30% - $0.74)) / pow(1 + 0.0194,2) + (12 * (35 * 30% - $0.74)) / pow(1 + 0.0194,3) + (8 * (25 * 30% - $0.74)) / pow(1 + 0.0194,4) + (4 * (20 * 30% - $0.74)) / pow(1 + 0.0194,5) + (2 * (20 * 30% - $0.74)) / pow(1 + 0.0194,6)) / 50 = $10.74 [+/- $0.32]

Use the same formula except without the value...
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