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    venom_ftw
    1. The document analyzes customer acquisition costs and customer lifetime values for different customer segments of a batting cage business. 2. It finds that the Elite Ballplayer (Party) segment has the highest profits, second fastest break-even, and highest customer lifetime value, making it the most attractive segment. 3. Offering discounts to Elite Ballplayers who spend over 20 hours a year would increase their retention rate and customer lifetime value, so the business should offer this promotion.

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    ABC

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    venom_ftw
    75 views4 pages
    1. The document analyzes customer acquisition costs and customer lifetime values for different customer segments of a batting cage business. 2. It finds that the Elite Ballplayer (Party) segment has the highest profits, second fastest break-even, and highest customer lifetime value, making it the most attractive segment. 3. Offering discounts to Elite Ballplayers who spend over 20 hours a year would increase their retention rate and customer lifetime value, so the business should offer this promotion.

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    1. The document analyzes customer acquisition costs and customer lifetime values for different customer segments of a batting cage business. 2. It finds that the Elite Ballplayer (Party) segment has the highest profits, second fastest break-even, and highest customer lifetime value, making it the most attractive segment. 3. Offering discounts to Elite Ballplayers who spend over 20 hours a year would increase their retention rate and customer lifetime value, so the business should offer this promotion.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    75 views4 pages

    ABC

    Uploaded by

    venom_ftw
    1. The document analyzes customer acquisition costs and customer lifetime values for different customer segments of a batting cage business. 2. It finds that the Elite Ballplayer (Party) segment has the highest profits, second fastest break-even, and highest customer lifetime value, making it the most attractive segment. 3. Offering discounts to Elite Ballplayers who spend over 20 hours a year would increase their retention rate and customer lifetime value, so the business should offer this promotion.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 4

    1.

    Calculate customer acquisition cost by segment


    Elite Elite
    Little Summer Ballplayers Ballplayers Entertainment
    Leaguers Sluggers (Print Ad) (Party) Seekers
    Contact Cost ¥1,000 ¥1,500 ¥300 ¥12,500 ¥50
    Response Rate 10.0% 15.0% 0.5% 25.0% 2.5%
    Acquisition Cost ¥10,000 ¥10,000 ¥60,000 ¥50,000 ¥2,000

    2. Determine customer breakeven by segment


    a) Little Leaguers
    Year 1 Year 2 Year 3 Year 4
    Little Leaguers
    Hourly Revenues ¥6,500 ¥6,500 ¥6,500 ¥6,500
    Hourly Costs ¥6,000 ¥6,000 ¥6,000 ¥6,000
    Hourly Margin ¥500 ¥500 ¥500 ¥500
    # of Annual Hours 10 10 10 10
    Annual Margin ¥ ¥5,000 ¥5,000 ¥5,000 ¥5,000
    Survival Rate 100.0% 75.0% 56.3% 42.2%
    Customer Acquisition Cost ¥10,000
    Annual Profit (¥5,000) ¥3,750 ¥2,813 ¥2,109
    NPV of Annual Profit (¥5,000) ¥3,409 ¥2,324 ¥1,585
    Cumulative Profit to Date (¥5,000) (¥1,250) ¥1,563 ¥3,672
    NPV of Cumulative Profit to Date (¥5,000) (¥1,591) ¥733 ¥2,318

    b) Summer sluggers
    Year 1 Year 2 Year 3 Year 4
    Summer Sluggers
    Hourly Revenues ¥3,000 ¥3,000 ¥3,000 ¥3,000
    Hourly Costs ¥1,500 ¥1,500 ¥1,500 ¥1,500
    Hourly Margin ¥1,500 ¥1,500 ¥1,500 ¥1,500
    # of Annual Hours 4 4 4 4
    Annual Margin ¥ ¥6,000 ¥6,000 ¥6,000 ¥6,000
    Survival Rate 100.0% 50.0% 25.0% 12.5%
    Customer Acquisition Cost ¥10,000
    Annual Profit (¥4,000) ¥3,000 ¥1,500 ¥750
    NPV of Annual Profit (¥4,000) ¥2,727 ¥1,240 ¥563
    Cumulative Profit to Date (¥4,000) (¥1,000) ¥500 ¥1,250
    NPV of Cumulative Profit to Date (¥4,000) (¥1,273) (¥33) ¥530

    c)
    Year 1 Year 2 Year 3 Year 4 Year 5
    Elite Ballplayers (Print Ad)
    Hourly Revenues ¥7,500 ¥7,500 ¥7,500 ¥7,500 ¥7,500
    Hourly Costs ¥6,000 ¥6,000 ¥6,000 ¥6,000 ¥6,000
    Hourly Margin ¥1,500 ¥1,500 ¥1,500 ¥1,500 ¥1,500
    # of Annual Hours 20 20 20 20 20
    Annual Margin ¥ ¥30,000 ¥30,000 ¥30,000 ¥30,000 ¥30,000
    Survival Rate 100.0% 60.0% 30.0% 15.0% 7.5%
    Customer Acquisition Cost ¥60,000
    Annual Profit (¥30,000) ¥18,000 ¥9,000 ¥4,500 ¥2,250
    NPV of Annual Profit (¥30,000) ¥16,364 ¥7,438 ¥3,381 ¥1,537
    Cumulative Profit to Date (¥30,000) (¥12,000) (¥3,000) ¥1,500 ¥3,750
    NPV of Cumulative Profit to Date (¥30,000) (¥13,636) (¥6,198) (¥2,817) (¥1,281)

    3. Calculate and explain CLV (Customer Lifetime Value)

    These are basically formula calculations. The key to these and any other numbers is to answer the
    question: "Now that I know these calculations, what do they mean and how do they describe the
    strategy I should implement to optimize my business?" What will be the competitive response? How
    can I separate my customer experience and increase its value over my competition?

    For the two page write ups from everyone, the idea would be to give me your thoughts on the market
    segments of greatest value to Maru based on the math you did and then any thoughts you have on : 1)
    Which is the most attractive segment for MBC to go after and why? 2) Should Maru pursue the Chiyoda
    ward sponsorhip? 3) What do you think about the suggestion by Maru's brother concerning the Elite
    Ballplayers as a focus for her business? Other thoughts?

    1) The most attractive customer segment to MBC is the Elite Ballplayer (Party) segment. This
    segment provides the highest amount of profits, the second-quickest break-even prospect, and
    the highest LTV when compared to all of the other segments
    MBC should throw the gala event because it will nearly triple the customer segment’s lifetime
    value due to the lower acquisition cost, caused by the higher response rate for this marketing
    tactice
    2) No MBC Should not pursue Chiyoda ward and should continue their representation with Minato
    ward as the NPV for Minato ward is greater than Chiyoda ward. NPV(Minato) =
    5712yenNPV(Chiyoda) = 4722 yen
    https://www.coursehero.com/file/p2l0175c/Ans-As-the-Customer-Life-Time-Value-decreased-
    to-4614-from-5557-it-is-not/
    As the Customer Life Time Value decreased to 4614 from 5557 it is not suggested to pursue the
    Chiyoda sponsorship. The below table explains the same
    3) Sa
    Maru’s brother suggested she focus on the Elite Ballplayers segment, targeting it by offering a 500
    discount on all future purchases to elite ballplayers who purchase at least twenty batting cage hours in
    year 1. (assume all elite ballplayer customers book exactly 20 hours each year) although this will
    decrease the amount MBC can bill Elite ballplayers from (7,500 to 7,000 per hour from year 2 onward),
    Maru believes it will increase the retention rate of these customers to 75% immediately. Should MBC
    offer this promotion? Explain your reasoning. Ans) It is prudent to consider this option as the Customer
    Life Time Value increases by 7,000 and it would result in a Customer Life Time Value of 22,656.

    In order to decide between sponsoring the Minato and Chiyoda little leaguers, MBC should consider the
    customer lifetime value that each ward could bring to the firm as wellas the size of the segments. When
    analyzing up to and including the year in which the NPV of annual profits fall below ¥100, we can see
    that Minato little leaguers are worth ¥4,983.33 (see table in 3a), while Chiyoda little leaguers bring in
    ¥4,195.33 (below)
    However, because Chiyoda little league has twice as many members, MBC can assume that they
    will acquire twice as many little leaguers if they target the Chiyoda ward. In conclusion, MBC should
    target the Chiyoda ward because these customers will bring in a greater total revenue.

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