A retail store sells a popular cosmetic called Devine and the store manager was given $100,000 by the corporate office to improve store performance any way she thinks best. The “base case” information is a price of $30 per bottle, a contribution margin of 0.50, a customer defection rate of 17 percent, and a repurchase frequency of three times a year. If these improvement funds could be used to 

(a) increase the contribution margin to 0.58 or 

(b) reduce the customer defection rate to 15 percent 

(c) increase the repurchase frequency to four times per year, what is the best way to spend these improvement funds by answering the next two multiple choice questions? (Assume all other variables remain at the base case level for each of the three improvement options.)

Use the Excel template VLC to answer these questions and summarize your answers using the table below:

• The value of a loyal customer (VLC) for improvement option (a) is _____?

• The best way to use the $100,000 in improvement funds is Option _____?

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Contribution Price Margin $30 0.50 $30 0.58 $30 0.50 $30 0.50 Repurchase Frequency 3 3 3 4 Defection Rate 17% 17% 15% 17% VLC in $