Assume that a customer in the small contractor target market segment buys an electric drill on average every two years (or every 0.5 year) for $200, when the gross margin on the drill averages 20 percent. Questions 1. What is the value of a loyal customer (VLC) if the customer retention rate is 50 percent? Round your answer to the nearest cent. $  2. What is the value of a loyal customer (VLC) if the customer retention rate increases to 75 percent? Round your answer to the nearest cent. $  3. What is a 1 percent change in market share worth to the manufacturer if it represents 150,000 customers? Round your answers to the nearest dollar. 50 percent customer retention rate case: $  75 percent customer retention rate case: $  4. What do you conclude? If customer retention can be increased from 50 to 75 percent through better value chain performance, the economic payoff is _________doubledquadrupled.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Assume that a customer in the small contractor target market segment buys an electric drill on average every two years (or every 0.5 year) for $200, when the gross margin on the drill averages 20 percent.

Questions

1. What is the value of a loyal customer (VLC) if the customer retention rate is 50 percent? Round your answer to the nearest cent.

2. What is the value of a loyal customer (VLC) if the customer retention rate increases to 75 percent? Round your answer to the nearest cent.

3. What is a 1 percent change in market share worth to the manufacturer if it represents 150,000 customers? Round your answers to the nearest dollar.

50 percent customer retention rate case: $ 

75 percent customer retention rate case: $ 

4. What do you conclude?

If customer retention can be increased from 50 to 75 percent through better value chain performance, the economic payoff is _________doubledquadrupled.

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