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Using CLV (Customer Lifetime Value) analysis to identify which customer segment to seed the market with a social influencer campaign. Below is the question: You

Using CLV (Customer Lifetime Value) analysis to identify which customer segment to seed the market with a social influencer campaign. Below is the question:

You are launching a radical innovation to the marketplace, an exercise mirror. You plan to adopt a social influencer marketing campaign where the influencer is given the product for free (a cost of $1000) in the hopes that s/he is able to convince his/her networks/followers to buy the product. You have the possibility of seeding the marketplace by targeting one of two types of influencer: Batman or Robin. The table below provides the characteristics of the two segments. Important here is the social influence measure, which is the probability of converting a member of the influencers network into an adopter of the product in any time period. The network size is the number of people the influencer knows. For the influencer, the profits only arise from advertisements run on the technology. For those who adopt the product because the influencer convinced them to buy the product, the profits arise not just from advertisements but also from hardware profit margin as given in table below. Assume no other acquisition effort was made besides the initial seeding and you have a time horizon of 5 years. Which customer segment is the better segment to seed?! Assume an interest rate of 10% for both segments.

Batman

Robin

Acquisition cost

1000$

1000$

Hardware Margin

200$

200$

Ad Margins

30$

50$

Network Size

100

100

Social Influence

0.0125

0.0075

Retention Rate

0.75

0.95

Please show the steps. This is a sort of Present Value problem, so money in future has to be discounted to current rates.

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