Brookside Tailors sells suits to three segments: Executive Custom, Signature, and Brookside One. Last year they had 6,000 Executive Custom, 15,550 Signature, and 38,200 Brookside One clients. The revenue they make annually from the three segments are as follows: $3500,$1800, and $600. The cost to serve these customers is as follows: $1000,$400, and $120, respectively. The retention rate for segments are 80%,76%, and 85%. Assuming an annual discount rate of 5%, please calculate the following: a. CLV for each segment. What is the total value of each segment? [6] b. Suppose the company decides that it would like to invest $2,500,000 next year on loyalty programs to increase the retention rate. How much would the retention rate need to increase to for each segment if the whole sum were spent in that segment? [6] c. Instead of spending on retention, let us say they are going to spend it to acquire more of customers. If they spend that amount of money, they anticipate targeting 2,000, 5000, and 10,000 customers from Executive Custom, Signature, and Brookside One, respectively. What percentage do they have to acquire from targeted audience from each segment to breakeven? How many customers does that work out to? [6] d. Imagine that growth rates in contribution are different for each segment for this incoming cohort of customers. The growth rates are 8%,12%, and 15% respectively. Recalculate CLV for each segment. What is the total value of each segment? [6] 3. Brookside Tailors sells suits to three segments: ExecutiveCustom, Signature, and Brookside One. Last year they had6,000 Executive Custom, 15,550 Signature, and 38,200Brookside One clients. The revenue they make annuallyfrom the three segments are as follows: $3500, $1800, and$600. The cost to serve these customers is as follows:$1000, $400, and $120, respectively. The retention rate forsegments are 80%, 76%, and 85%. Assuming an annualdiscount rate of 5%, please calculate the following:a. CLV for each segment. What is the total value of eachsegment? [6]b. Suppose the company decides that it would like toinvest $2,500,000 next year on loyalty programs toincrease the retention rate. How much would theretention rate need to increase to for each segment ifthe whole sum were spent in that segment? [6]c. Instead of spending on retention, let us say they aregoing to spend it to acquire more of customers. If theyspend that amount of money, they anticipate targeting2,000, 5000, and 10,000 customers from ExecutiveCustom, Signature, and Brookside One, respectively.What percentage do they have to acquire from targetedaudience from each segment to breakeven? How manycustomers does that work out to? [6]d. Imagine that growth rates in contribution are differentfor each segment for this incoming cohort ofcustomers. The growth rates are 8%, 12%, and 15%respectively. Recalculate CLV for each segment. Whatis the total value of each segment? [6]

CLV Calculation and Total Segment Value: We initially determined the client Lifetime Value (CLV) for…

3. Brookside Tailors sells suits to three segments: Executive Custom, Signature, and Brookside One. Last year they had 6,000 Executive Custom, 15,550 Signature, and 38,200 Brookside One clients. The revenue they make annually from the three segments are as follows: $3500, $1800, and $600. The cost to serve these customers is as follows: $1000, $400, and $120, respectively. The retention rate for segments are 80%, 76%, and 85%. Assuming an annual discount rate of 5%, please calculate the following: a. CLV for each segment. What is the total value of each segment? [6] b. Suppose the company decides that it would like to invest $2,500,000 next year on loyalty programs to increase the retention rate. How much would the retention rate need to increase to for each segment if the whole sum were spent in that segment? [6] c. Instead of spending on retention, let us say they are going to spend it to acquire more of customers. If they spend that amount of money, they anticipate targeting 2,000, 5000, and 10,000 customers from Executive Custom, Signature, and Brookside One, respectively. What percentage do they have to acquire from targeted audience from each segment to breakeven? How many customers does that work out to? [6] d. Imagine that growth rates in contribution are different for each segment for this incoming cohort of customers. The growth rates are 8%, 12%, and 15% respectively. Recalculate CLV for each segment. What is the total value of each segment? [6]

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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Brookside Tailors sells suits to three segments: Executive Custom, Signature, and Brookside One. Last year they had 6,000 Executive Custom, 15,550 Signature, and 38,200 Brookside One clients. The revenue they make annually from the three segments are as follows: $3500,$1800, and $600. The cost to serve these customers is as follows: $1000,$400, and $120, respectively. The retention rate for segments are 80%,76%, and 85%. Assuming an annual discount rate of 5%, please calculate the following: a. CLV for each segment. What is the total value of each segment? [6] b. Suppose the company decides that it would like to invest $2,500,000 next year on loyalty programs to increase the retention rate. How much would the retention rate need to increase to for each segment if the whole sum were spent in that segment? [6] c. Instead of spending on retention, let us say they are going to spend it to acquire more of customers. If they spend that amount of money, they anticipate targeting 2,000, 5000, and 10,000 customers from Executive Custom, Signature, and Brookside One, respectively. What percentage do they have to acquire from targeted audience from each segment to breakeven? How many customers does that work out to? [6] d. Imagine that growth rates in contribution are different for each segment for this incoming cohort of customers. The growth rates are 8%,12%, and 15% respectively. Recalculate CLV for each segment. What is the total value of each segment? [6]

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