Answered step by step
Verified Expert Solution
Question
1 Approved Answer
AJ Financial ( AJF ) Group is reviewing its past performance and formulating its strategy for the future. The company sells financial products ( life
AJ Financial AJF Group is reviewing its past performance and formulating its strategy for the future. The company sells financial products life insurance, mutual funds, and certificates as well as financial plans and advice to its customers. Last year, AJF had total revenue of $ billion and variable cost of $ billion. It had a customer base of million. AJF also offers customized financial plans for its customers based on each customers demographics and lifestyle. Currently, of its customers have customized financial plans, while of new customers typically sign up for financial plans. Customers with plans buy products; customers without financial plans purchase products.
AJF was quite happy with its current customer retention rate of However, management is concerned that it had only of its customers share of wallet ie of the total money customers spent on financial services and products, they spent only with AJF Management is considering the following three options:
Increase the customer retention rate from to
Increase the customers share of wallet from to
Change the customer mix of plan and nonplan customers from its current to
To make these decisions, however, management wants your help to determine the maximum amount of
money it should spend on each of these three options. Assume every product provides the same profit
and assume a discount rate of
What is the maximum that AJF should spend for each situation
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started