Backround KC Steaks KC Steaks is a company that sells and ships gourmet steaks and other perishable food products to customers around the country in sealed containers filled with dry ice to preserve freshness. For twity ya mail order, but now KC Steaks sells through multiple channels, including nearly one hundred retail stores, telemarketing and its online e-commerce site In recent meetings during the strategic planning process for next year, the management team wanted to know how the Mutime value of its customers would be impacted try some proposed changes to it increase the acquisition of new customers from two target segments: "Foodies' and 'Non Foodies KC Steaksis considering the purchase of a list of foodies from a list broker for $1.50 per name. They are able to obtain a list of non-foodies for free. The intend to send each person on the list a catalogen costs the company S0.40 to produce and $0.25 to mail. Those who do not purchase within one year will be removed from the mailing list. Historically similar types of Foodie festste gerated response rate percent-that is, 7.5 percent of customers who received an unsolicited catalog in this manner eventually made a purchase. KC Straks has acquired a list of Won Goodies for free. The response rate for 7 typically been percent KC Steaks has also made the following assumptions regarding revenue, costs and retention rates 1) Foodie customers purchase more frequently than non-foodies. "Foodies make the purchases per year with an average order size of $, non foodies make one purchase annually with an average enderskie 21 Foodie who tend to remain customers toneerwith an annual retention rate of 75 percent sans action rate of 65 percent for non goodies 3) Foodies' purchase gourmet products regularly, they tond to purchasesse products than their non foodle chunterparts, who view KC Steaks as special occasion product on which to splurg margin is assumed to be 52' for 'voodies' and Go for non-foodies 10 SER Using the assumptions that have been provided and the Strategic Planning Approach for Estimating LTV, estimate LIV for both segments by completing the income Statement on the coast Income Statemen this. Stk. Ancate Percent 2 Pet front PICY SETTINIS APP Ying Norm fo 1 0 21 Assumptions Foodie NonFood Lion Cato con Shipping cos A Cat Cost Foodies YO Yan 2 Year Year Year YO YOYO Lot Orders Ordure Tot even Total Cost to Target Response rate 4 Agurton Cost per Custom Cous Annual Contributin Mann Customer Accu Annual Operating Margin OM Surat Rae Expected van ANOM des per Yes Order Contriton Margin scount Rate NPV Opel ANOM CNPV Pro to e YER YA Yea YOY YAYIT Non-Foodies onder Order Www Cost Gan Accou Annual Operating Margin OM EUW HUREN CANO Teclad ALOM KO NTV Cam B 8 ad Type here to docente DO A B D Question 1: What is LTV in Year 10 for an average 'Foodie' customer? 4 5 13 7 Question 2: What is LTV in Year 10 for an average 'Non-Foodie' customer? 10 11 12 13 14 75 10 Question 3: For each customer segment, how long does it take to recover the initial acquisition costs (what is the break even year?)? IT 10 20 21 22 2 24 25 wo SA o 21 Backround KC Steaks KC Steaks is a company that sells and ships gourmet steaks and other perishable food products to customers around the country in sealed containers filled with dry ice to preserve freshness. For twity ya mail order, but now KC Steaks sells through multiple channels, including nearly one hundred retail stores, telemarketing and its online e-commerce site In recent meetings during the strategic planning process for next year, the management team wanted to know how the Mutime value of its customers would be impacted try some proposed changes to it increase the acquisition of new customers from two target segments: "Foodies' and 'Non Foodies KC Steaksis considering the purchase of a list of foodies from a list broker for $1.50 per name. They are able to obtain a list of non-foodies for free. The intend to send each person on the list a catalogen costs the company S0.40 to produce and $0.25 to mail. Those who do not purchase within one year will be removed from the mailing list. Historically similar types of Foodie festste gerated response rate percent-that is, 7.5 percent of customers who received an unsolicited catalog in this manner eventually made a purchase. KC Straks has acquired a list of Won Goodies for free. The response rate for 7 typically been percent KC Steaks has also made the following assumptions regarding revenue, costs and retention rates 1) Foodie customers purchase more frequently than non-foodies. "Foodies make the purchases per year with an average order size of $, non foodies make one purchase annually with an average enderskie 21 Foodie who tend to remain customers toneerwith an annual retention rate of 75 percent sans action rate of 65 percent for non goodies 3) Foodies' purchase gourmet products regularly, they tond to purchasesse products than their non foodle chunterparts, who view KC Steaks as special occasion product on which to splurg margin is assumed to be 52' for 'voodies' and Go for non-foodies 10 SER Using the assumptions that have been provided and the Strategic Planning Approach for Estimating LTV, estimate LIV for both segments by completing the income Statement on the coast Income Statemen this. Stk. Ancate Percent 2 Pet front PICY SETTINIS APP Ying Norm fo 1 0 21 Assumptions Foodie NonFood Lion Cato con Shipping cos A Cat Cost Foodies YO Yan 2 Year Year Year YO YOYO Lot Orders Ordure Tot even Total Cost to Target Response rate 4 Agurton Cost per Custom Cous Annual Contributin Mann Customer Accu Annual Operating Margin OM Surat Rae Expected van ANOM des per Yes Order Contriton Margin scount Rate NPV Opel ANOM CNPV Pro to e YER YA Yea YOY YAYIT Non-Foodies onder Order Www Cost Gan Accou Annual Operating Margin OM EUW HUREN CANO Teclad ALOM KO NTV Cam B 8 ad Type here to docente DO A B D Question 1: What is LTV in Year 10 for an average 'Foodie' customer? 4 5 13 7 Question 2: What is LTV in Year 10 for an average 'Non-Foodie' customer? 10 11 12 13 14 75 10 Question 3: For each customer segment, how long does it take to recover the initial acquisition costs (what is the break even year?)? IT 10 20 21 22 2 24 25 wo SA o 21