Starbucks' customer satisfaction has been reported as high as 89%. Because of this, the company has always experienced high retention rates. They are planning to implement a new promotion campaign, aimed to reach a new target market - a customer segment they have previously neglected (i.e. 12 million people). They plan to invest 45,500,000$ on the campaign in the first year. Given that their past data indicates that it costs 40% less to keep an existing customer than to acquire a new one, they expect that their advertising campaign budget will be 40% less in year 2 (than in year 1). They are expected to convert 1/3 of the market.

Projections for Year 1 of the campaign

They expect that customers will spend approximately $5.59 per visit, and that the customer is likely to visit a Starbucks once per week.

Contribution margin: 23%

Projections for Year 2 of the campaign

They expect that customers will spend approximately $6.33 per visit, and that the customer is likely to visit a Starbucks 1.5 times per week.

Contribution margin: 23.7%

The marketing analytics team is optimistic about reaching a high Customer Lifetime Value with this particular market. They aim to gain a total CLV of $120.00 within a two year period.

If they want to achieve their CLV objective, what percentage of customers do they have to retain in year 2 (what's the retention rate)? *assume 52 week in one year