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Instructions: List your variables, write out the basic formulas, then calculate in the next step. Please fill in your answers below each question part in the document (in black font). The assignment is worth 80 points. See brackets for point values. Please submit one copy per team. I encourage you all to try the questions and compare answers. That way, you will be checking each other to make sure they are correct. If you want to do it in Excel, please label all your numbers (e.g. variable names in one row and numbers in the next row), and show your work with enough steps, so that it is easy to follow. I will check your formulas there. ScentGift is a subscription perfume company that offers customer packages to try perfumes/colognes per month. It has three membership levels for sale: GoGetter (1 scent/month), Magnet (2 scents/month), and Slay (4 scents/month). There is a one-time sign-up fee of $30, $40, or $50, respectively for the three levels. The marketing team expects scents will sell in sales mix ratio of 2:7:16. The prices of the scents to each member level are $45, $36, $25, respectively. The variable costs to serve each level are $7, $10, and $12, respectively. They anticipate the ad campaign they need to run will cost around $2.5M. How many packages of each type do they need to sell in order to breakeven? Ignore the sign-up fee for now. [3] Assume that they could get a total of 450,000 customers with the marketing budget mentioned above, and they can achieve retention rates in the three segments of 86%, 70%, and 67%, respectively. Using a discount rate of 6%, please calculate the CLV 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-r))-AC+signup fee Suppose that next year they have $600,000 in their marketing budget that they can spend on one of the three segments. Help them decide by calculating what the retention rate target should be for each segment if the entire $600,000 is spent on that segment. (Hint: Rearrange the formula in terms of r, and calculate the new M. To find the size of each segment, use the sales mix, e.g. GoGetter would be 2/25 of the total number of customers.) [3] New r= ((CLV+AC-signup fee)(1+d))/((New M+CLV+AC-signup fee)) If they instead spend that $2M on advertising to 100,000 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 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]