5. You have recently been asked by your boss to come up with an estimate of customer lifetime value for your firm's typical customer. Your firm sells high-end road and mountain bikes and related accessories. Customer contact is primarily on-line, through catalogs, targeted mailings, targeted e-mails and the occasional telephone call. After some digging around, and asking a lot of questions, you've been able to assemble the following information for a typical customer: Average order: $ 506 Frequency of orders: 2.0 /year Average margin: 64 % markup on retail Customer retention rate: 78 % Promotional/communication costs/yr $ 35 Your discount rate: 9 % Customer acquisition cost $ 402 Calculate the expected customer lifetime value for a new cutomer, rounded to the nearest dollar.

answer: 1140

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