1.5 Customer Retention and Profitability

1. How would net marketing contribution change if the customer retention changed to 75%
2. What is the Pre-tax returns on Sales if if the customer retention changed to 75%

FIGURE 1-8 CUSTOMER RETENTION AND PROFITABILITY Retained Customers 70% Customer Retention Sales and Profit Performance Sales (millions) Revenue per Customer Sales (millions) Percent Margin Gross Profit (millions) Marketing & Sales Expenses per Customer Marketing & Sales Expenses (millions) Net Marketing Contribution (millions) Other Expenses (millions) Profit Before Tax Pre-Tax Return on Sales 70,000 $1,000 $70.0 45% $31.5 $100.00 $7.0 $24.5 Lost New Customers Customers 30,000 30,000 $300 $500 $9.0 $15.0 35% 30% $3.2 $4.5 $50.00 $500.00 $1.5 $15.0 $1.7 -$10.5 Overall Performance 100,000 $940.0 $94.0 42% $39.2 $180.77 $23.5 $15.7 $10.0 $5.7 6.0% 80% Customer Retention Sales and Profit Performance Number of Customers Revenue per Customer Sales (millions) Percent Margin Gross Profit (millions) Marketing & Sales Expenses per Customer Marketing & Sales Expenses (millions) Net Marketing Contribution (millions) Other Expenses (millions) Profit Before Tax Pre-Tax Return on Sales Retained Customers 80,000 $1,000 $80.0 45% $36.0 $110.00 $8.8 $27.2 Lost Customers 20,000 $300 $6.0 35% $2.1 $55.00 $1.1 $1.0 New Overall Customers Performance 20,000 100,000 $500 $960.0 $10.0 $96.0 30% 43% $3.0 $41.1 $500.00 $165.83 $10.0 $19.9 -$7.0 $21.2 $10.0 $11.2 11.7%