following information is available to estimate customer lifetime value for a new customer: Average order: $ 464 Frequency of orders: 2.2 /year Average margin: 60 % markup on retail Customer retention rate: 58 % Promotional/communication costs/yr $ 48 Your discount rate: 9 % Customer acquisition cost $ 171
following information is available to estimate customer lifetime value for a new customer: Average order: $ 464 Frequency of orders: 2.2 /year Average margin: 60 % markup on retail Customer retention rate: 58 % Promotional/communication costs/yr $ 48 Your discount rate: 9 % Customer acquisition cost $ 171
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter12: Fainancial Statement Analysis
Section: Chapter Questions
Problem 84PSA
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Question
![Your firm sells high-end road and mountain bikes and related accessories. The
following information is available to estimate customer lifetime value for a new
customer:
Average order: $ 464
Frequency of orders: 2.2 /year
Average margin: 60 % markup on retail
Customer retention rate: 58 %
Promotional/communication costs/yr $ 48
Your discount rate: 9%
Customer acquisition cost $ 171
What is the maximum amount your firm can afford to spend to increase customer
retention from 58 % to 82 %? Report your answer rounded to the nearest dollar.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F69b01947-a433-431f-8130-8857e03e334f%2F00955eac-4a8f-4fd8-b339-d5e9a5330b4a%2Fxaqyvxv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Your firm sells high-end road and mountain bikes and related accessories. The
following information is available to estimate customer lifetime value for a new
customer:
Average order: $ 464
Frequency of orders: 2.2 /year
Average margin: 60 % markup on retail
Customer retention rate: 58 %
Promotional/communication costs/yr $ 48
Your discount rate: 9%
Customer acquisition cost $ 171
What is the maximum amount your firm can afford to spend to increase customer
retention from 58 % to 82 %? Report your answer rounded to the nearest dollar.
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