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: $ 493
Frequency of orders: 1.6 /year
Average margin: 60 % markup on retail
Customer retention rate: 61 %
Promotional/communication costs/yr $ 48
Your discount rate: 12 %
Customer acquisition cost $ 166

What is the maximum amount your firm can afford to spend to increase customer retention from 61 % to 80 %? 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.