1. Customer Life-Time Value

A retail store is thinking about whether or not it should create a frequent shopper program for its customers. To make the decision, it starts keeping track of some customers shopping behaviors (see table below) to get some rough idea about customers purchase behaviors within certain period of time.

Customer	Feb.	March	April	May	June	July
A	$10	$20	$30	$30	$20	$10
B	$20	$20	$20	$20	$20	$20
C	$60			$60
D			$120
E	$40	$35			$40	$35

(1) (5 points) Based upon the following customer purchase data, which customer would have a higher life-time value to the retail store? And why?

Assumption:

1. The acquisition cost for each new customer is $15.

2. Each customer will purchase three times a year. For each purchase, the profit value is $5.

3. Retention rate (r) is 75% and Interest rate (i) is 15%.