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Consider ABC Sportswear, a catalog seller of Sportswear. You have data on the purchase behavior of six customers over the last five months (assume you are analyzing the data in the month of June). The following table gives the dollar amount that each customer spent during January through May: Jan 230 30 Customer 1 2 3 4 5 6 Feb 0 30 0 20 200 40 300 March 200 0 10 0 0 130 April 30 150 0 40 0 160 May 70 0 40 0 40 60 30 50 0 The following table gives the frequencies of purchase in each month for the six customers: Customer 1 2 3 4 5 Jan 1 1 1 2 1 5 Feb 0 1 0 1 3 1 March 2 0 1 0 0 3 April 1 3 0 1 0 1 May 1 0 1 0 1 0 6 4. Now analyze each customer's profitability for the months of June through August as of the beginning of June using the CLV. Let the gross profits be 30% of the purchase amount. ABC Sportswear has three ways of contacting customers with marketing messages- (a) through email campaigns guided to the online store, and (b) by directly mailing catalogs to customers and (c) selling through telephone call-ins. For the month of June through August, the cost of contacting a customer once via email is $0.25, via direct mailers is $1 and via telephone calls is $3. On the average per month, Customers 1, 2 and 3 are contacted via email 2 times, and direct mail 5 times. Customers 4, 5 and 6 receive email 1 time, and telephone calls 3 times per month. Now calculate and analyze the CLV of each customer for the months of June, July and August as of the beginning of June. Hint: The CLV of a customer is their NPV of GC minus their NPV of Marketing Cost. (Refer notes for Individual CLV formula (slide # 22 in Session 5)). It is also available below: 1 -A (1 + d) CLV = { (Plativele x 6cu) Mkegu) * Step 1: Compute P(Alive) for each future month You already did this for q3. Step 2: Compute predicted GC for each future month for this exercise, you can use average GC predict GC for the next three months (June, July, & August) multiply GC for each month with the corresponding P(Alive). This is your MONEY IN part. Step 3: Compute predicted MC for each future month The average cost of marketing and the average number of marketing contacts is given in the question. So now you can compute the predicted cost of marketing for each customer for each future month (June, July, & August). Mktge = scoste x # of contactsite (= customer; c = channel; t = future time) Step 4: Subtract MC from the value (GC x P(Alive)) computed in Step 2. Step 5: Take Net Present Value (NPV) for each value. Use discount rate of 15% annually. Multiply this value with the value computed in Step 4. Step 6: If applicable, subtract acquisition cost. In this exercise, we do not know the acquisition cost. So assume it to be zero (0). Consider ABC Sportswear, a catalog seller of Sportswear. You have data on the purchase behavior of six customers over the last five months (assume you are analyzing the data in the month of June). The following table gives the dollar amount that each customer spent during January through May: Jan 230 30 Customer 1 2 3 4 5 6 Feb 0 30 0 20 200 40 300 March 200 0 10 0 0 130 April 30 150 0 40 0 160 May 70 0 40 0 40 60 30 50 0 The following table gives the frequencies of purchase in each month for the six customers: Customer 1 2 3 4 5 Jan 1 1 1 2 1 5 Feb 0 1 0 1 3 1 March 2 0 1 0 0 3 April 1 3 0 1 0 1 May 1 0 1 0 1 0 6 4. Now analyze each customer's profitability for the months of June through August as of the beginning of June using the CLV. Let the gross profits be 30% of the purchase amount. ABC Sportswear has three ways of contacting customers with marketing messages- (a) through email campaigns guided to the online store, and (b) by directly mailing catalogs to customers and (c) selling through telephone call-ins. For the month of June through August, the cost of contacting a customer once via email is $0.25, via direct mailers is $1 and via telephone calls is $3. On the average per month, Customers 1, 2 and 3 are contacted via email 2 times, and direct mail 5 times. Customers 4, 5 and 6 receive email 1 time, and telephone calls 3 times per month. Now calculate and analyze the CLV of each customer for the months of June, July and August as of the beginning of June. Hint: The CLV of a customer is their NPV of GC minus their NPV of Marketing Cost. (Refer notes for Individual CLV formula (slide # 22 in Session 5)). It is also available below: 1 -A (1 + d) CLV = { (Plativele x 6cu) Mkegu) * Step 1: Compute P(Alive) for each future month You already did this for q3. Step 2: Compute predicted GC for each future month for this exercise, you can use average GC predict GC for the next three months (June, July, & August) multiply GC for each month with the corresponding P(Alive). This is your MONEY IN part. Step 3: Compute predicted MC for each future month The average cost of marketing and the average number of marketing contacts is given in the question. So now you can compute the predicted cost of marketing for each customer for each future month (June, July, & August). Mktge = scoste x # of contactsite (= customer; c = channel; t = future time) Step 4: Subtract MC from the value (GC x P(Alive)) computed in Step 2. Step 5: Take Net Present Value (NPV) for each value. Use discount rate of 15% annually. Multiply this value with the value computed in Step 4. Step 6: If applicable, subtract acquisition cost. In this exercise, we do not know the acquisition cost. So assume it to be zero (0)