CLV calculation example Using the Tier One customer data in the scenario, the CLV for a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
CLV calculation example Using the Tier One customer data in the scenario, the CLV for a Tier One customer is calculated as follows: Where Tier One has GP = $4,500 | RR = 0.85 | DR = 0.10| AC = $2,500 Tier One CLV = ($4,500 x (0.85/(1+ 0.1-0.85))) - $2,500 → = ($4,500 x (0.85/0.25)) – $2,500 → = ($4,500 x 3.4) – $2,500 → = $15,300 – $2,500 = $12,800 → = $12,800 per Tier One customer Questions 1. Using the VerilLink's GP, AC, and RR data in the scenario for a Tier Two customer: [a] Calculate the CLV for a Tier Two customer. How does the CLV for a Tier Two customer compare to the CLV for a Tier One customer (Tier One is calculated in the example)? Verilink has the following customer counts according to B2B segment: Segment Service Number of Level Name Tier One Tier Two Customers Premium 380 Basic 640 ТOTAL 1,020 [b] Using the customer counts, compare the total values for each segment. What does this comparison of total segment-level value tell you about the overall profitability of the B2B market for Verilink? 2. The marketing team has been considering customer retention campaigns for the Tier One segment. [a] How does CLV for a Tier One customer change if Verilink improves the retention rate for Tier One from 85% to 90% (new T1 retention increases to RR = 0.9)? [b] Assuming the retention rate for Tier Two does NOT change (remains RR = 0.85), how does improving retention for Tier One (to 90%) alter the comparison of overall segment-level profitability from Q2b? 3. In your judgment, how should the results of these CLV calculations guide the marketing team in formulating the B2B market strategy? Be sure to address SPECIFIC DECISIONS about Verilink's B2B strategy, like segment targeting and the allocation of resources between customer acquisition and customer retention efforts. Use facts from the analysis to support your argument. CLV calculation example Using the Tier One customer data in the scenario, the CLV for a Tier One customer is calculated as follows: Where Tier One has GP = $4,500 | RR = 0.85 | DR = 0.10| AC = $2,500 Tier One CLV = ($4,500 x (0.85/(1+ 0.1-0.85))) - $2,500 → = ($4,500 x (0.85/0.25)) – $2,500 → = ($4,500 x 3.4) – $2,500 → = $15,300 – $2,500 = $12,800 → = $12,800 per Tier One customer Questions 1. Using the VerilLink's GP, AC, and RR data in the scenario for a Tier Two customer: [a] Calculate the CLV for a Tier Two customer. How does the CLV for a Tier Two customer compare to the CLV for a Tier One customer (Tier One is calculated in the example)? Verilink has the following customer counts according to B2B segment: Segment Service Number of Level Name Tier One Tier Two Customers Premium 380 Basic 640 ТOTAL 1,020 [b] Using the customer counts, compare the total values for each segment. What does this comparison of total segment-level value tell you about the overall profitability of the B2B market for Verilink? 2. The marketing team has been considering customer retention campaigns for the Tier One segment. [a] How does CLV for a Tier One customer change if Verilink improves the retention rate for Tier One from 85% to 90% (new T1 retention increases to RR = 0.9)? [b] Assuming the retention rate for Tier Two does NOT change (remains RR = 0.85), how does improving retention for Tier One (to 90%) alter the comparison of overall segment-level profitability from Q2b? 3. In your judgment, how should the results of these CLV calculations guide the marketing team in formulating the B2B market strategy? Be sure to address SPECIFIC DECISIONS about Verilink's B2B strategy, like segment targeting and the allocation of resources between customer acquisition and customer retention efforts. Use facts from the analysis to support your argument.
Expert Answer:
Answer rating: 100% (QA)
Ans 1a Let us assume Average Gross Margin per customer life span for Tier Two customer is A g Rate o... View the full answer
Related Book For
Valuation The Art and Science of Corporate Investment Decisions
ISBN: 978-0133479522
3rd edition
Authors: Sheridan Titman, John D. Martin
Posted Date:
Students also viewed these accounting questions
-
A firms net income is calculated as the difference in the revenues it recognizes for the period less the expenses it incurred in the process of generating those revenues. The method used to determine...
-
t for a single-sample t test is calculated by dividing the difference between M and by ____.
-
12 On 1 1 X7 Sharpco purchased 10 percent of Astco s common stock for 70 000 an amount equal to the book value of Astco s underlying net assets Sharpco appropriately used the cost method of...
-
Date 1 July 2019 1 June 2020 30 June 2020 1 July 2020 1 July 2020 30 June 2021 1 July 2021 Particulars (???) (???) (To record acquisition of delivery truck) (???) (???) (???) (To record minor repair...
-
Describe four provisions of the Sarbanes-Oxley Act.
-
An eyewitness observes a hit-and-run accident in New York City, where 95% of the cabs are yellow and 5% are blue. A witness asserts the cab was blue. A police expert believes the witness is 80%...
-
Presented below are summary financial data from Porter's annual report: Calculate the following ratios: a. Times-interest-earned ratio b. Quick ratio c. Current ratio Balance sheet Cash and cash...
-
Jan Spears opened her decorating company on January 1, 2008. During the first month of operations, the following transactions occurred: 1. Performed services for country club clients. On January 31,...
-
Evaluate a portfolio of U . S . equities drawn from the S&P 5 0 0 . The five stocks in your portfolio have the FactSet identifiers as follows: STOCK 1 : ABT - US . Average annual return = 4 . 5 4 2 %...
-
The three forces are applied to the bracket. Determine the range of values for the magnitude of force P so that the resultant of the three forces does not exceed 2400 N. 3000 N 90%- Prob. 2-38 800 N...
-
Explain the rights and responsibilities of debtors and creditors in such secured transactions as the bank has proposed and how this information may have a bearing on the company's decision to proceed...
-
Furniture company manufactures quality furniture's to customers orders . it has two production departments and two service departments . budgeted overheads are machine insurance 1 6 , 8 0 0 ,...
-
We represent the manufacturer of an exercise ball. Our client is being sued because its ball burst while a teenage championship wrestler was doing a dumb bell press. Your lawyer walks in your office...
-
Indicators are used in autoclaving to ensure that sterilization is complete. One type of chemical indicator turns color when it has reached a specific temperature; the other type turns color when it...
-
The economic crisis of 2007-09 was deep and prolonged enough to be known as "The Great Recession" and was followed by what was, according to some, a long but unusually slow recovery marked by...
-
Watch the video An Insider's Plan for Rehabilitating the Juvenile Justice System, Jeff Wallace ( https://www.youtube.com/watch?v=TOxpjjzP6lM ). and use Shawn's case chosen from the PBS cases Four...
-
7. To save this work and submit it for grading, you will need to save your WORKSPACE. This workspace will be a .RData file. Other files, like the .R. file or the .R.Proj file are NOT acceptable for...
-
In Exercises 15 through 30, find the derivative dy/dx. In some of these problems, you may need to use implicit differentiation or logarithmic differentiation. y ex + et -2x 1 + e
-
Clarion Manufacturing Company is a publicly held company that is engaged in the manufacture of home and office furniture. The firms most recent income statement and balance sheet are found below. a....
-
You have been retained by a major entertainment company to evaluate the purchase of land near one of its new amusement parks in Australia. The land will not be developed immediately, but it will be...
-
Family Security is considering the introduction of a child security product consisting of tiny Global Positioning system (GPS) tracker that can be inserted in the sole of a childs shoe. The tracker...
-
Prove (5.37) and (5.38).
-
Show that for the birthweight data in Section 5. 6.6.2 there is no significant decrease in birthweight for smoking mothers. [Hint: create a new variable nonsmoke \(=1\)-smoke, which reverses the...
-
In the Tobit regression model with normally distributed errors, the response is modeled as: \[ Y_{i}=\left\{\begin{array}{ll} Z_{i}, & \text { if } u_{i} u_{i}}...
Study smarter with the SolutionInn App