1. Smokey Bones Restaurant opens for lunch and dinner. Though the menu is the same, they charge on average $18 for lunch or $30 for dinner, which cost the restaurant $5 and $7 to prepare, respectively.
2. If the restaurant has a retention rate of 62% among lunch customers, and 74% among dinner customers by offering $3.50 per customer per month in loyalty program rewards. Assume a discount factor of 1.5% per month and last month it served 15,650 meals to 5,360 customers, and 35% of those meals were lunch. Calculate CLV of lunch customers and dinner customers. (Hint: Think of M as the amount of money the restaurant makes per month from each customer). [6]

2. If the restaurant manager decided to increase loyalty spending to $5 for its lunch customers and $8 for its dinner customers, what would the retention rates have to increase to in order to justify this spending on each segment? (Use the CLV from part (b) to find r) [6]

3. If the restaurant is willing spend $50,000 to reach 10,000 potential customers (lunch and dinner combined), what is the minimum acquisition rate that would justify this expense? Assume the same split among segments (35% lunch and 65% dinner). Calculate the Breakeven acquisition rate for each segment. How many customers does that work out to? [Hint: 35% of the target audience will be the lunch target audience. Use the same CLVs in part a]. [4]

4. Imagine that after spending the $50,000, they got 2,100 new lunch customers and 1,650 new dinner customers. What would be the CLV of the new batches of customers? [Hint: For each segment, AC = ($50,000 *% meal type)/# of customers acquire Use the original numbers from part a.] [4]