Business, 11.02.2021 21:20 AgentPangolin

Before tackling the Rosewood case, this initial question tests your ability to compute the CLV metric and then apply it in a simple break even analysis. The data below show the results of a Starbucks segmentation study. Each column shows the values for a typical customer in each class (constant over the lifetime of the customer). The annual retention probability applies only after the first year. That is, no one defects until after a full year of patronizing Starbucks. Silver Gold Platinum
Visits/Month 4.2 5.3 9.8
Revenue Per Visit $3.98 $4.20 $4.42
Annual Retention
Probability 0.40 0.50 0.60
A. Assume that Starbucks’ gross margin is 40% and that its (one-time) customer acquisition cost is $100. Further assume that Starbucks uses a discount rate of 9%. What is the 5-year individual customer CLV for each class of customer?
B. Suppose Starbucks is considering an investment of $40 million in their 3500 company-owned North American stores to improve service quality, and thereby, customer retention. How many customers per store would have to be "converted" from Gold to Platinum for the investment to achieve breakeven after five years?

Answers: 2

Show answers

Other questions on the subject: Business

Business, 21.06.2019 23:10, SmokeyRN

Kando company incurs a $9 per unit cost for product a, which it currently manufactures and sells for $13.50 per unit. instead of manufacturing and selling this product, the company can purchase product b for $5 per unit and sell it for $12 per unit. if it does so, unit sales would remain unchanged and $5 of the $9 per unit costs assigned to product a would be eliminated. 1. prepare incremental cost analysis. should the company continue to manufacture product a or purchase product b for resale? (round your answers to 2 decimal places.)

Answers: 1

continue

Business, 22.06.2019 09:50, steph76812

Why should managers invest any excess cash

Answers: 1

continue

Business, 22.06.2019 11:10, takaralocklear

An insurance company estimates the probability of an earthquake in the next year to be 0.0015. the average damage done to a house by an earthquake it estimates to be $90,000. if the company offers earthquake insurance for $150, what is company`s expected value of the policy? hint: think, is it profitable for the insurance company or not? will they gain (positive expected value) or lose (negative expected value)? if the expected value is negative, remember to show "-" sign. no "+" sign needed for the positive expected value

Answers: 2

continue

Business, 22.06.2019 12:50, HarleyQuinn117

Performance bicycle company makes steel and titanium handle bars for bicycles. it requires approximately 1 hour of labor to make one handle bar of either type. during the most recent accounting period, barr company made 7,700 steel bars and 2,300 titanium bars. setup costs amounted to $35,000. one batch of each type of bar was run each month. if a single company-wide overhead rate based on direct labor hours is used to allocate overhead costs to the two products, the amount of setup cost assigned to the steel bars will be:

Answers: 2

continue

You know the right answer?

Before tackling the Rosewood case, this initial question tests your ability to compute the CLV metri...