A subscription wine club service, Winc, is planning to launch four monthly wine packages. They

intend to hire a celebrity wine expert to design the combinations offered in the four new packages:

Starter, Discover, Sophisticated, and Provocative. Winc will spend $$60,000$ to hire the wine expert,

and $$360,000$ on marketing. The prices and variable costs of the monthly meal packages are: Pstarter $=$

$$25,VC=$$$12$; PDiscover $=$$$45,V{C}_{\text{D}\text{i}\text{s}\text{c}\text{o}\text{v}\text{e}\text{r}}=$$$16$;$P_{\text{S}\text{o}\text{p}\text{h}\text{i}\text{s}\text{t}\text{i}\text{c}\text{a}\text{t}\text{e}\text{d}}=$$$85,VC$ sophisticated $=$$$40$; and $P_{\text{P}\text{r}\text{o}\text{v}\text{o}\text{c}\text{a}\text{t}\text{i}\text{v}\text{e}}=$

$$120,$ VCProvocative $=$$$62.$ They expect to sell the packages in the ratio $4$:$5$:$7$:$3,$ respectively. The total

customer base of Winc is $75,000$ customers.

a$.$ Calculate the breakeven quantity for each model. $[4]$

b$.$ Assume that customers who buy certain packages don't switch to different ones, but the

probability of staying with Winc from month to month has been $65\%,72\%,68\%,$ and $85\%.$

Assuming a discount rate of $4\%$ monthly, calculate the CLV for customers in each meal plan

segment. Use the total contribution for each meal plan from part $($a$)$ as the margin in each

case and remember to subtract the AC $($which is the FC$/$customer base$).[4]$

c$.$ If Winc 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,\frac{000}{?}$ number of customers in that

segment. Rearrange the CLV formula in terms of $r$ gives the following$).[3]$

New $r=\frac{(CLV+AC)(1+d)}{(NewM+CLV+AC)}$

d$.$ Suppose that instead of spending on retention, Winc would like to increase the number of

customers from its highest CLV segment. It is considering an ad buy for the $$300,000,$ which

will be viewed by $5,000$ potential customers in that segment. What percent of the targeted

customers would need to join in order for the acquisition spending to be worthwhile? Add a

sentence to explain what your answer means. $[3]$

Breakeven Acquisition Rate $=\frac{\text{A}\text{c}\text{q}\text{u}\text{i}\text{s}\text{i}\text{t}\text{i}\text{o}\text{n}\text{S}\text{p}\text{e}\text{n}\text{d}\text{i}\text{n}\text{g}}{CLV}$

e$.$ Again, just looking at the highest CLV segment, suppose that instead of spending the whole

$$300,000$ on the ad buy, Winc would like to consider spending some funds on ads and some

on coupons. Assuming that option $1)$ spending the $$300,000$ on advertising would have

brought in $1,500$ customers, option $2)$ spending $$175,000$ on ads, and offering a $$40$ coupon

would draw $2,500$ new customers, and option $3)$ spending $$175,000$ on ads, and offering a

$$30$ coupon would draw $1,800$ new customers.

iii. Calculate the new CLV for each option $[3]$:

$$300,000$ on ads

$$175,000$ on ads and a $$40$ coupon

$$175,000$ on ads and a $$30$ coupon

Hint: $($Ad spending$/$number who switched$)+$ coupon$).|$

iv$.$ Calculate the total segment value for those new customers for each option from

part $($i$).($Hint: CLV $*$ number of new customers$).[3]$