CLV $-$ A discrete time horizon example

$$ Nikki Paints sells interior and exterior paints and supplies. They currently have about $100,000$ customers per year with annual sales of about $$12$ million.

$$ Consider the following:

$$ average annual purchase per customer $=$ $$120$

$$ COGS is $50\%$ of sales.

$$ other variable costs accounted for $20\%$ of sales.

$$ retention rate is $30\%$

$$ Assume a discount rate of $10\%$ and a $3-$year time horizon.

$$ CLV $($or LTV$)$ is the net present value of the profit that you will realize on the average new customer over a number of years... how much will you make Year $1???$ How much in total???

$1.$ Use the discrete CLV formula to answer the questions.

a$.$ How much money will Nikki Paints make in year one?

b$.$ How much money will Nikki Paints make in total?

Joe's Paints $-$ Years $1-3$

Revenue Year $1$ Year $2$ Year $3$

Retention rate $(\%)0\mathrm{.}00\%0\mathrm{.}00\%0\mathrm{.}00\%$

Buying Customers $($#$)---$

Spending rate $($$$)$ $$0\mathrm{.}00$ $$0\mathrm{.}00$ $$0\mathrm{.}00$

Revenues $$0$ $$0$ $$0$

Variable Costs

COGS $+$ other direct VC $(\%)0\%0\%0\%$

Total Costs $$0\mathrm{.}00$ $$0\mathrm{.}00$ $$0\mathrm{.}00$

Profits

Gross Profit $$0\mathrm{.}00$ $$0\mathrm{.}00$ $$0\mathrm{.}00$

Year $123$

Discount rate $1\mathrm{.}001\mathrm{.}101\mathrm{.}21$

NPV profit $$0\mathrm{.}00$ $$0\mathrm{.}00$ $$0\mathrm{.}00$

Cumulative NPV profit $$0\mathrm{.}00$ $$0\mathrm{.}00$ $$0\mathrm{.}00$

Customer LTV #DIV$/0!$ #DIV$/0!$ #DIV$/0!$