You may wish to set up a spreadsheet for this exercise.

Develop a 5-year lifetime value calculation using the following figures:

• 1000 customers in Year 1

• retention 50% per year

• sales £600 per year, increasing at 5% per year

• net profit 15%

• discount rate 15%.

Then see what would be the impact of:

reducing the discount rate to 10%

spending an additional £60 per customer on a retention scheme that leads to a recommends rate of 5% and an increase in retention to 60% per year.