Question
Nike estimates that it can persuade Ms. Consumer in 2021 to start purchasing Nike shoes in 2022, and to continue purchasing Nike shoes in 2023
Nike estimates that it can persuade Ms. Consumer in 2021 to start purchasing Nike shoes in 2022, and to continue purchasing Nike shoes in 2023 and 2024 before switching to Adidas. The likelihood of purchase is expected to decrease by 10% each year starting in 2023. Marketing expenses in 2021 to get her to start using Nike shoes in 2022 are estimated at $50, and she is expected to spend $100 on a pair of Nike shoes each year from 2022, with the variable costs for each pair of shoes being $50 each year. Using a discount rate of 10%, what is her CLV to Nike, assuming the calculations are done in 2021?
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