The ABC company makes a product for $5. marketing research revealed that direct mailing of a product sample is very effective in creating loyal customers. in addition to the unit cost of the sample of $3, there is a $1 shipping/handling cost associated with the mail out. one in 4 recipients of thee sample is expected to become a loyal customer. The company plans to send a $1 coupon to these customers each year to maintain loyalty - postage and handling for the coupon is $0.50.

Research further revealed that these customers purchase 6 units of the companys product each year and do not buy competing products. however, each year 10 % switch to competitor's products and then only purchase the competitors.

1. What is the acquisition cost of a customer? show calculations

2. What is CLV of an already acquired customer? show calculations

3. Is the commpanys acqusition strategy sound? Explain.