1. BugsOut is a pest control company that is launching services in the Southern region of the United States. It has three packages for sale: Termites Only, Yard Bugs, and the Works. The marketing team expects that customers will buy them in sales mix ratio of 4:52. Think of the sales mix as the number of visits per year. The package prices are $75, 590, $230 per treatment, respectively. The variable costs for the packages are $25, $34, and $40, respectively. They anticipate that the ad campaign they need to run will cost around $90M across three states. a. How many treatments of each type do they need to sell in order to breakeven? [3] b. Assume that they were able to get a total of 1,553,100 households with the marketing budget mentioned above, and they can achieve retention rates in the three segments of 85%, 67%, and 72%, respectively. Using a discount rate of 6% annually, please calculate the CIV for each segment. (Hint: M - total contribution for each segment from part a AC = FC/total number of customers) (Note: Just use the same Ac for each segment) [6] CLV Mr (1 + d AG C Suppose that next year they have $S5M in their marketing budget that they can spend across the three segments, what would each retention rate target be for each segment if the entire $55M is spent on that segment? (Hint: Rearrange the formula in terms of and calculate the new M. To find the size of each segment, use the sales mix, e.gi Termites would be 4/11 of the total number of customers.) [3] (CLV + AC)(1+d) (M + CLV + AC) d. If they instead spend that $55M on advertising to 600,000 households in their highest CLV segment, how many new customers would they need to acquire to breakeven? (Hint: Use the CLV from part b). [2] Breakeven Acquisition Rate Acquisition Spending CLV e. They expect that after the first year they will be able to increase margins from their original batch of customers (part b) year to year by 4%, 6%, 2%, respectively. Please recalculate the CLV for each segment. Assume that the AC is a sunk cost (they have already broken even on that original batch). In other words, calculate it without AC. [6] 2. Bosch is about to launch three new windshield wiper blades to the market: Envision, Icon, and Micro, Bosch expects to sell the wiper blades in the ratio 3:5:9 respectively. The prices of the blades will be $32, $23, and $16, and have variable costs of $7, ss, and $4, respectively. They plan to spend $2M in design, S4M in equipment and $75M in advertising to acquire 10 million new customers. a. Calculate the breakeven quantities for each wiper model.13] b. Assume the replacement cycle for wiper blades is roughly a year, and the probability that these customers repurchase from Bosch the following year is 82%, 76%, 79% respectively, and the discount rate is 6% annually. Calculate the CLV for customers in each segment. (Hint: M = total contribution for each segment from part a, AC = Fc/total number of customers) (Note: Just use the same AC for each segment) (6) C. Suppose the company is considering mailing out a $5 birthday coupon to encourage loyalty. What is the minimum retention rate for each segment required to maintain the same CI found in part b (hint: rearrange the following formula in terms oft. M = total contribution from parta). [3] d. If the company is considering spending $50M next year targeted to an audience of 3 million customers, what would be the breakeven acquisition rate for each segment to justify spending $50M. (hint: calculate acquisition spending per customer and divide by CLVS from part b). [3] 1. BugsOut is a pest control company that is launching services in the Southern region of the United States. It has three packages for sale: Termites Only, Yard Bugs, and the Works. The marketing team expects that customers will buy them in sales mix ratio of 4:52. Think of the sales mix as the number of visits per year. The package prices are $75, 590, $230 per treatment, respectively. The variable costs for the packages are $25, $34, and $40, respectively. They anticipate that the ad campaign they need to run will cost around $90M across three states. a. How many treatments of each type do they need to sell in order to breakeven? [3] b. Assume that they were able to get a total of 1,553,100 households with the marketing budget mentioned above, and they can achieve retention rates in the three segments of 85%, 67%, and 72%, respectively. Using a discount rate of 6% annually, please calculate the CIV for each segment. (Hint: M - total contribution for each segment from part a AC = FC/total number of customers) (Note: Just use the same Ac for each segment) [6] CLV Mr (1 + d AG C Suppose that next year they have $S5M in their marketing budget that they can spend across the three segments, what would each retention rate target be for each segment if the entire $55M is spent on that segment? (Hint: Rearrange the formula in terms of and calculate the new M. To find the size of each segment, use the sales mix, e.gi Termites would be 4/11 of the total number of customers.) [3] (CLV + AC)(1+d) (M + CLV + AC) d. If they instead spend that $55M on advertising to 600,000 households in their highest CLV segment, how many new customers would they need to acquire to breakeven? (Hint: Use the CLV from part b). [2] Breakeven Acquisition Rate Acquisition Spending CLV e. They expect that after the first year they will be able to increase margins from their original batch of customers (part b) year to year by 4%, 6%, 2%, respectively. Please recalculate the CLV for each segment. Assume that the AC is a sunk cost (they have already broken even on that original batch). In other words, calculate it without AC. [6] 2. Bosch is about to launch three new windshield wiper blades to the market: Envision, Icon, and Micro, Bosch expects to sell the wiper blades in the ratio 3:5:9 respectively. The prices of the blades will be $32, $23, and $16, and have variable costs of $7, ss, and $4, respectively. They plan to spend $2M in design, S4M in equipment and $75M in advertising to acquire 10 million new customers. a. Calculate the breakeven quantities for each wiper model.13] b. Assume the replacement cycle for wiper blades is roughly a year, and the probability that these customers repurchase from Bosch the following year is 82%, 76%, 79% respectively, and the discount rate is 6% annually. Calculate the CLV for customers in each segment. (Hint: M = total contribution for each segment from part a, AC = Fc/total number of customers) (Note: Just use the same AC for each segment) (6) C. Suppose the company is considering mailing out a $5 birthday coupon to encourage loyalty. What is the minimum retention rate for each segment required to maintain the same CI found in part b (hint: rearrange the following formula in terms oft. M = total contribution from parta). [3] d. If the company is considering spending $50M next year targeted to an audience of 3 million customers, what would be the breakeven acquisition rate for each segment to justify spending $50M. (hint: calculate acquisition spending per customer and divide by CLVS from part b). [3]