A computer manufacturer currently has a 20 percent customer defection rate. Their accounting department estimates the incremental contribution to profit and overhead as 35 percent.

Customers purchase computers every four years at an average cost of $1,200.00. In an effort to reduce the defection rate, the company is improving both the quality of its computers and its post-sale service.

Use the Excel template VLC to determine the increase in the average value of a loyal customer if the defection rate drops to 5 percent.