RJX is a company that sells insurance products to other businesses. Last year, RJX had total revenue of $3billion and variable cost of $1.5billion. Its customer base consisted of 146,000 businesses.RJX also offers customized factory and office security services for its customers based on each organizations requirements. Currently, 14% of RJXs customers have customized security services contracts with RJX, while 25% of new customers typically sign up for insurance plans. Customers with security services buy 4.2 products; customers with insurance products purchase 1.9 products. RJX was quite happy with its current customer retention rate of 91%. However, management is concerned that it had only 10% of its customers share of wallet (i.e., of the total money customers spent on security services and insurance products, they spent only 10% with RJX). Management is considering the following three options:

1.Increase the customer retention rate from 91% to 92%.

2.Increase the customers share of wallet from 10% to 12%.

3.Change the customer mix of security services and insurance plan customers from its current 14%/87% to25%/75%.

To make these decisions, however, management wants your help to determine the maximum amount of money it should spend on each of these three options. Which of these three options would you recommend to the company? Why? Assume every product provides the same profit and assume a discount rate of 10%. Hint:Calculate and compare CLV for all three options.