How would net marketing contribution change if the customer retention changed to 75%? FIGURE 1-8 CUSTOMER RETENTION AND PROFITABILITY70% Customer RetentionSales and Profit PerformanceRetainedCustomersLostCustomersNewCustomersOverallPerformanceSales (millions)70,00030,00030,000100,000Revenue per Customer$1,000$300$500$940.0Sales (millions)$70.0$9.0$15.0$94.0Percent Margin45%35%30%42%Gross Profit (millions)$31.5$3.2$4.5$39.2Marketing & Sales Expenses per Customer$100.00$50.00$500.00$180.77Marketing & Sales Expenses (millions)$7.0$1.5$15.0$23.5Net Marketing Contribution (millions)$24.5$1.7-$10.5$15.7Other Expenses (millions)$10.0Profit Before Tax$5.7Pre-Tax Return on Sales6.0%RetainedCustomersOverall80% Customer RetentionSales and Profit PerformanceLostCustomersNewCustomers PerformanceNumber of Customers80,00020,00020,000100,000Revenue per Customer$1,000$300$500$960.0Sales (millions)$80.0$6.0$10.0$96.0Percent Margin45%35%30%43%Gross Profit (millions)$36.0$2.1$3.0$41.1Marketing & Sales Expenses per Customer$110.00$55.00$500.00$165.83Marketing & Sales Expenses (millions)$8.8$1.1$10.0$19.9Net Marketing Contribution (millions)$27.2$1.0-$7.0$21.2Other Expenses (millions)$10.0Profit Before Tax$11.2Pre-Tax Return on Sales11.7%

Net marketing contribution at 70% = $15.7 millions Net marketing contribution at 80% = $21.2…

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How would net marketing contribution change if the customer retention changed to 75%?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

How would net marketing contribution change if the customer retention changed to 75%?

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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