Your firm sells high-end road and mountain bikes and related accessories. The following information is available to estimate customer lifetime value for a new customer: Average order: $ 470 Frequency of orders: 1.7 /year Average margin: 60 % markup on retail Customer retention rate: 62 % Promotional/communication costs/yr $ 38 Your discount rate: 9 % Customer acquisition cost $ 162 What is the maximum amount your firm can afford to spend to increase customer retention from 62 % to 78 %? Report your answer rounded to the nearest dollar. To answer the question, calculate CLV at the higher retention rate and subtract the CLV at the lower retention rate. The difference will be the maximum amount the company can afford to spend to increase customer retention.

ANSWER: 528 (Show how to solve)