Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cool Beans is a locally owned coffeeshop that competes with two large coffee chains, PlanetEuro and Frothies. Alicia, the owner, is considering two different marketing

Cool Beans is a locally owned coffeeshop that competes with two large coffee chains, PlanetEuro and Frothies. Alicia, the owner, is considering two different marketing promotions and thinks that CLV analysis will help her decide the best course of action. An average specialty coffee drink sells for $3.31 and has a margin of 62%. One promotion is providing loyalty cards to her regular customers that would give them one free specialty coffee drink after 10 regular purchases. Alicia estimates that this will increase the frequency of their purchases by 18%. Currently, her customers average buying 2 specialty drinks per week. The second promotion is targeted at new customers. She would offer a free specialty drink to incoming college freshmen by providing a coupon with their orientation packages. Because of her location near the college, she expects that 330 students will come to Cool Beans for a free trial. Of those, she anticipates that 12% will become regular customers who will purchase at least one specialty drink each week. The cost of printing and distributing the coupons is $140. What is the CLV of a customer over the time horizon of one year prior to introduction of the loyalty program?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Management A Strategic Emphasis

Authors: Edward Blocher, David Stout, Paul Juras, Gary Cokins

7th edition

77733770, 978-0077733773

More Books

Students also viewed these Accounting questions

Question

What is a VOAD, and what does it do?

Answered: 1 week ago

Question

What entities are eligible for Public Assistance grant funding?

Answered: 1 week ago