MKTG 489

1. ScentGift is a subseription perfume company that offers customer packages to try perfumes/colognes per month. It has three packages for sale: GoGetter (1 scent), Magnet (2 scents), and Slay (4 scents). The marketing team expects customers will buy them in sales mix ratio of 5:8:2. The package prices are $20,$35,$60, respectively. The variable costs for the packages are $7,$12, and $18, respectively. They anticipate the ad campaign they need to run will cost around $3M. a. How many treatments of each type do they need to sell in order to breakeven? [3] b. Assume that they could get a total of 650,000 customers with the marketing budget mentioned above, and they can achieve retention rates in the three segments of 86%, 70%, and 67\%, respectively. Using a monthly discount rate of 6%, please calculate the CLV for each segment. (Hint: M= total contribution for each segment from part a. AC= FC/total number of customers) (Note: Just use the same AC for each segment) [6] CLV=(1+dr)MrAC c. Suppose that next year they have $2M in their marketing budget that they can spend on one of the three segments. Help them decide by calculating what the retention rate target should be for each segment if the entire $2M is spent on that segment. (Hint: Rearrange the formula in terms of r, and calculate the new M. To find the size of each segment, use the sales mix, e.g, Slay would be 5/15 of the total number of customers.) [3] r=(M+CLV+AC)(CLV+AC)(1+d) d. If they instead spend that $2M on advertising to 100,000 households in their highest CLV segment, how many new customers would they need to acquire to breakeven? (Hint: Use the CLV from part b). [2] Breakeven Acquisition Rate =CLVAcquisitionSpending e. They expect that after the first year they will be able to increase margins from their original batch of customers (part b) year to year by 4%,6%,2%, respectively. Please recalculate the ClV for each segment. Assume that the AC is a sunk cost (they have already broken even on that original batch). In other words, calculate it without AC. [6] 1. ScentGift is a subseription perfume company that offers customer packages to try perfumes/colognes per month. It has three packages for sale: GoGetter (1 scent), Magnet (2 scents), and Slay (4 scents). The marketing team expects customers will buy them in sales mix ratio of 5:8:2. The package prices are $20,$35,$60, respectively. The variable costs for the packages are $7,$12, and $18, respectively. They anticipate the ad campaign they need to run will cost around $3M. a. How many treatments of each type do they need to sell in order to breakeven? [3] b. Assume that they could get a total of 650,000 customers with the marketing budget mentioned above, and they can achieve retention rates in the three segments of 86%, 70%, and 67\%, respectively. Using a monthly discount rate of 6%, please calculate the CLV for each segment. (Hint: M= total contribution for each segment from part a. AC= FC/total number of customers) (Note: Just use the same AC for each segment) [6] CLV=(1+dr)MrAC c. Suppose that next year they have $2M in their marketing budget that they can spend on one of the three segments. Help them decide by calculating what the retention rate target should be for each segment if the entire $2M is spent on that segment. (Hint: Rearrange the formula in terms of r, and calculate the new M. To find the size of each segment, use the sales mix, e.g, Slay would be 5/15 of the total number of customers.) [3] r=(M+CLV+AC)(CLV+AC)(1+d) d. If they instead spend that $2M on advertising to 100,000 households in their highest CLV segment, how many new customers would they need to acquire to breakeven? (Hint: Use the CLV from part b). [2] Breakeven Acquisition Rate =CLVAcquisitionSpending e. They expect that after the first year they will be able to increase margins from their original batch of customers (part b) year to year by 4%,6%,2%, respectively. Please recalculate the ClV for each segment. Assume that the AC is a sunk cost (they have already broken even on that original batch). In other words, calculate it without AC. [6]