FIGURE 1-8 CUSTOMER RETENTION AND PROFITABILITY 70% Customer Retention Sales and Profit Performance Retained Customers Customers Overall Performance Lost New Customers Sales (millions) 70,000 30,000 30,000 100,000 Revenue per Customer $1,000 $300 $500 $940.0 Sales (millions) $70.0 $9.0 $15.0 $94.0 Percent Margin 45% 35% 30% 42% Gross Profit (millions) $31.5 $3.2 $4.5 $39.2 Marketing & Sales Expenses per Customer $100.00 $50.00 $500.00 $180.77 Marketing & Sales Expenses (millions) $7.0 $1.5 $15.0 $23.5 Net Marketing Contribution (millions) $24.5 $1.7 -$10.5 $15.7 Other Expenses (millions) $10.0 Profit Before Tax $5.7 Pre-Tax Return on Sales 6.0% 80% Customer Retention Sales and Profit Performance Retained Customers Customers Customers Performance Lost New Overall Number of Customers 80,000 20,000 20,000 100,000 Revenue per Customer $1,000 $300 $500 $960.0 Sales (millions) $80.0 $6.0 $10.0 $96.0 Percent Margin 45% 35% 30% 43% Gross Profit (millions) $36.0 $2.1 $3.0 $41.1 Marketing & Sales Expenses per Customer $110.00 $55.00 $500.00 $165.83 Marketing & Sales Expenses (millions) $8.8 $1.1 $10.0 $19.9 Net Marketing Contribution (millions) $27.2 $1.0 -$7.0 $21.2 Other Expenses (millions) $10.0 Profit Before Tax $11.2 Pre-Tax Return on Sales 11.7%
FIGURE 1-8 CUSTOMER RETENTION AND PROFITABILITY 70% Customer Retention Sales and Profit Performance Retained Customers Customers Overall Performance Lost New Customers Sales (millions) 70,000 30,000 30,000 100,000 Revenue per Customer $1,000 $300 $500 $940.0 Sales (millions) $70.0 $9.0 $15.0 $94.0 Percent Margin 45% 35% 30% 42% Gross Profit (millions) $31.5 $3.2 $4.5 $39.2 Marketing & Sales Expenses per Customer $100.00 $50.00 $500.00 $180.77 Marketing & Sales Expenses (millions) $7.0 $1.5 $15.0 $23.5 Net Marketing Contribution (millions) $24.5 $1.7 -$10.5 $15.7 Other Expenses (millions) $10.0 Profit Before Tax $5.7 Pre-Tax Return on Sales 6.0% 80% Customer Retention Sales and Profit Performance Retained Customers Customers Customers Performance Lost New Overall Number of Customers 80,000 20,000 20,000 100,000 Revenue per Customer $1,000 $300 $500 $960.0 Sales (millions) $80.0 $6.0 $10.0 $96.0 Percent Margin 45% 35% 30% 43% Gross Profit (millions) $36.0 $2.1 $3.0 $41.1 Marketing & Sales Expenses per Customer $110.00 $55.00 $500.00 $165.83 Marketing & Sales Expenses (millions) $8.8 $1.1 $10.0 $19.9 Net Marketing Contribution (millions) $27.2 $1.0 -$7.0 $21.2 Other Expenses (millions) $10.0 Profit Before Tax $11.2 Pre-Tax Return on Sales 11.7%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
2. What is the Pre-tax returns on Sales if the customer retention changed to 75%?
Transcribed Image Text:FIGURE 1-8 CUSTOMER RETENTION AND PROFITABILITY
70% Customer Retention
Sales and Profit Performance
Retained
Customers
Lost
Customers
New
Customers
Overall
Performance
Sales (millions)
70,000
30,000
30,000
100,000
Revenue per Customer
$1,000
$300
$500
$940.0
Sales (millions)
$70.0
$9.0
$15.0
$94.0
Percent Margin
45%
35%
30%
42%
Gross Profit (millions)
$31.5
$3.2
$4.5
$39.2
Marketing & Sales Expenses per Customer
$100.00
$50.00
$500.00
$180.77
Marketing & Sales Expenses (millions)
$7.0
$1.5
$15.0
$23.5
Net Marketing Contribution (millions)
$24.5
$1.7
-$10.5
$15.7
Other Expenses (millions)
$10.0
Profit Before Tax
$5.7
Pre-Tax Return on Sales
6.0%
Retained
Customers
Overall
80% Customer Retention
Sales and Profit Performance
Lost
Customers
New
Customers Performance
Number of Customers
80,000
20,000
20,000
100,000
Revenue per Customer
$1,000
$300
$500
$960.0
Sales (millions)
$80.0
$6.0
$10.0
$96.0
Percent Margin
45%
35%
30%
43%
Gross Profit (millions)
$36.0
$2.1
$3.0
$41.1
Marketing & Sales Expenses per Customer
$110.00
$55.00
$500.00
$165.83
Marketing & Sales Expenses (millions)
$8.8
$1.1
$10.0
$19.9
Net Marketing Contribution (millions)
$27.2
$1.0
-$7.0
$21.2
Other Expenses (millions)
$10.0
Profit Before Tax
$11.2
Pre-Tax Return on Sales
11.7%
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