• A catalogue marketer mails out catalogues 4 times/year.
• The company groups its customers into two segments: premier and regular. There currently are 40,000 premier and 60,000 regular customers. The contribution margins of the two segments are $100 and $75, respectively (per year).
• The retention rates of premier and regular customers are 60% and 50%, respectively (per year).
• Acquiring new names to mail catalogues to costs $5/valid name and address. About 5% of new acquired names that have catalogs mailed to them convert to customers over the course of a years (4) mailings, falling into each spending segment in the same ratio as their current customers. The marginal cost of printing and mailing each catalog is $ 2.50/customer/catalog.
• The firms discount rate is 5%.

Which of the following actions would turn the average CLV positive?

a. Increase retention to 75% for premier and 65% for regular customers

b. Decrease catalog cost to $ 1.50/mailing

c. Increase margins to $ 125/year (premier) and $ 85/year (regular)

d. Decrease the discount rate to 4%