Page 2 > The Story of Mr. Montsinger and Wilson's Dry Cleaners* Understanding The Value Of A Customer: Customer Lifetime Value Analysis Exercise He has been so happy with the quality and service that he has recommended Wilson's Dry Cleaners to 10 of his friends, and 5 of them are now customers. These new customers each spend $23.00 per week. Using the approach on Net Present Value and Customer Lifetime Value discussed in our Zoom class, answer the following questions. It may be helpful to use the recorded content from Lecture 3A (see Canvas/Panopto) Assume Mr. and Mrs. Montsinger spend an average of $36 per week at Wilson's Dry Cleaners. Wilson's makes 50% margin on the Montsinger's purchases. Mr. Montsinger is expected to be a regular customer at Wilson's Dry Cleaners for the next 4 years, before he and his wife move to a different neighborhood. 1. What is the value, in today's dollars, of the Montsinger's business to Wilson's Dry Cleaner? (25 points) Assume an interest rate of 7%. For purposes of calculation, assume that all the Montsinger's purchases are lumped together at the end of the year. Assume there are exactly 52 weeks in a year. 2. What is the value to Wilson's Dry Cleaners of those referrals, in today's dollars? (25 points) Assume that because Mr. and Mrs. Montsinger are satisfied customers, they will tell 10 of their close friends about Wilson's Dry Cleaners. Five (5) of those friends become regular customers, spending $23.00 each per week over the next 4 years. Consider the 2 basic options which Abigail Wilson has: shirts. Wilson's Dry Cleaner could spend $36 to refund Mr. Montsinger's order and $400 to replace his This will satisfy Mr. Montsinger, retain his business, and retain the business of his friends. b. They could also simply ignore Mr. Montsinger, save $436, and wait for the shirts to just "show up. " F2 80 F3 000 000 F4 # 3 4 % 95 MacBook Air AA DII DD F5 F6 F7 F8 F9 66 7 29 & * 8 ( 9 0 F10 Page < 2 > of 2 1. What is the value, in today's dollars, of the Montsinger's business to Wilson's Dry Cleaner? (25 points) Assume an interest rate of 7%. For purposes of calculation, assume that all the Montsinger's purchases are lumped together at the end of the year. Assume there are exactly 52 weeks in a year. 2. What is the value to Wilson's Dry Cleaners of those referrals, in today's dollars? (25 points) Assume that because Mr. and Mrs. Montsinger are satisfied customers, they will tell 10 of their close friends about Wilson's Dry Cleaners. Five (5) of those friends become regular customers, spending $23.00 each per week over the next 4 years. Consider the 2 basic options which Abigail Wilson has: a. Wilson's Dry Cleaner could spend $36 to refund Mr. Montsinger's order and $400 to replace his shirts. This will satisfy Mr. Montsinger, retain his business, and retain the business of his friends. b. They could also simply ignore Mr. Montsinger, save $436, and wait for the shirts to just "show up." Mr. Montsinger would tell his friends about his treatment, 3 of them would decide to use another drycleaner, and Mr. Montsinger would also leave. 3. What is your recommendation to Abigail Wilson? Why? Support your answer showing financial impact. (be sure to show these) (35 points) F2 I 4. What additional management/operations solutions might you also recommend to Abigail Wilson? Support. (15 points) Reminder: You must show your work to get credit *Based on an HBR Case Study, The Case of the Complaining Customer, Dan Finkelman and Tony Goland 80 F3 3 # $ 4 000 000 F4 95 F5 MacBook Air F6 6 91 & 7 28 F7. * 8 DII DD F8 F9 F10 ( 6 0