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Gibbs Family Dentistry provides dental work for three segments: Good shape (cleanings and checkups), Replacements (more extensive surgeries including extractions and dentures), and Braces (clients
- Gibbs Family Dentistry provides dental work for three segments: Good shape (cleanings and checkups), Replacements (more extensive surgeries including extractions and dentures), and Braces (clients who need dental realignment). Last year they had 425 good shape, 210 replacements, and 65 braces customers. The revenue they make annually from the three segments are as follows: $350, $2500, and $3650. The cost to serve these customers is as follows: $120, $1000, and $1500, respectively. The retention rate for segments are 83%, 76%, and 90%. Assuming an annual discount rate of 6%, please calculate the following:
- CLV for each segment. What is the total value of each segment? [3]
- Suppose the company decides that it would like to invest $25,000 next year on loyalty programs to increase the retention rate. How much would the retention rate need to increase to for each segment if the whole sum were spent in that segment? [6]
- Instead of spending on retention, let us say they are going to spend it to acquire more of their highest CLV segment customers. They decide to reach out to 1,000 potential customers, what percentage do they have to acquire to breakeven? How many customers does that work out to? [3]
- Imagine that growth rates in contribution are different for each segment for this incoming cohort of customers. The growth rates are 8%, 15%, and 5% respectively. Recalculate CLV for each segment. What is the total value of each segment? [3]
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