A subscription food delivery service, Extra Tasty, is planning to launch four precooked meal packages.They intend to hire a celebrity chef to develop the recipes offered in the four new packages: Vegan, Glu-free, MeatLove and Keto. Extra Tasty will spend $15,000 to hire a top chef to create the recipes, and $225,000 on marketing. The prices and variable costs of the meal packages are: P_Vegan = $312, VC_Vegan = $70; P_Glu-free = $280, VC_Glu-free = $62; P_MeatLove= $336, VC_MeatLove = $80; and P_Keto = $240, VC_Keto = $48. They expect to sell the packages in the ratio 4:5:7:3, respectively. The total customer base of Extra Tasty is 15,000 customers.

If Extra Tasty has $300,000 to spend on increasing the retention rate in the segment with the highest CLV, what would the retention rate need to increase to, in order to justify spending that amount on retention. (Hint: Number of customers would be the sales mix fraction times the total customer base. Change M by subtracting $300,000umber of customers in that segment. Rearrange the CLV formula in terms of r gives the following). [3]

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