SlideShare a Scribd company logo
UPDATED: Customer Lifetime Value Exercise: In Style 2
A direct catalog retailer of fashion goods, In Style, is trying to attract new customers
by sending out catalogs. The cost of sending a catalog (which includes production and
mailing) is $5. From experience, In Style anticipates the percentage of individuals
who receive the catalog and purchase from it to be 5%.
The average order placed with the company is $150. The margin for all products is
about 70%, order processing is about $10 per order, and delivery/shipment costs is
about $15 per order.
Assume that each of the customers acquired will stay with the company for 5 years.
Each year, In Style tries to retain these customers by sending a monthly catalog and
the cost of sending out each catalog is $10. Historical records show that the response
rate for these existing customers is about 20%.
What is the CLTV of an In Style customer?
Note: Assume a discount rate of 10% (i = 10%) in making the calculation.
Customer Lifetime Value Exercise Solution
1. Net acquisition cost of an InStyle customer:
Acquisition cost = $5 per catalog / 5% response rate = $100
Contribution = Order Value – Variable Costs
Order Value = $150 per order
Variable Costs = ($150 * (1 – 70% margin)) + $10 processing cost per order
+ $15 delivery/shipment cost per order.
= $150 – $70 = $80
Net acquisition cost = $100 - $80 = $20 per customer
2. Total discounted net value of an InStyle customer:
Year 1 Year 2 Year 3 Year 4 Year 5
Cost $10 per catalog * 12
months = $120
$120 $120 $120 $120
Contribution $80 contribution/order *
20% response rate * 12
months = $192
$192 $192 $192 $192
Net value $192- $120 = $72 $72 $72 $72 $72
Discounted
net value
$72/1.1 $72/(1.1^2) $72/(1.1^3) $72/(1.1^4) $72/(1.1^5)
Total discounted net value = $272. 94 per customer
3. CLTV of an InStyle customer:
= $272.94 - $20 = $252.94 per customer

More Related Content

What's hot

Wesco case B2B case study
Wesco case B2B case studyWesco case B2B case study
Wesco case B2B case study
Abhijeet Kumar
 
AJANTA PACKAGING.pptx
AJANTA PACKAGING.pptxAJANTA PACKAGING.pptx
AJANTA PACKAGING.pptx
SaarthakAgarwal3
 
Atlantic computer case analysis
Atlantic computer case analysisAtlantic computer case analysis
Atlantic computer case analysisFarhan Khan
 
Colgate- Palmolive: Managing International Careers
Colgate- Palmolive: Managing International CareersColgate- Palmolive: Managing International Careers
Colgate- Palmolive: Managing International Careers
Tajan Joseph
 
Pepsi Lipton Brisk - Harvard Business Review Case
Pepsi Lipton Brisk - Harvard Business Review CasePepsi Lipton Brisk - Harvard Business Review Case
Pepsi Lipton Brisk - Harvard Business Review Case
Famy
 
Atlantic Computers: A Bundle of Pricing Options
Atlantic Computers: A Bundle of Pricing OptionsAtlantic Computers: A Bundle of Pricing Options
Atlantic Computers: A Bundle of Pricing Options
JasmineDennis
 
Metabical - Marketing Case Study
Metabical - Marketing Case StudyMetabical - Marketing Case Study
Metabical - Marketing Case Study
Shrishti Gupta
 
Wal-Mart Stores in 2003 (HBS Case 9-704-430)
Wal-Mart Stores in 2003 (HBS Case 9-704-430)Wal-Mart Stores in 2003 (HBS Case 9-704-430)
Wal-Mart Stores in 2003 (HBS Case 9-704-430)
Aditya Jhunjhunuwala
 
Virgin mobile USA pricing first time case analysis
Virgin mobile USA pricing first time case analysisVirgin mobile USA pricing first time case analysis
Virgin mobile USA pricing first time case analysis
Siddharth Dhamija
 
Distribution & Channel Management, Promotion Decisions OF ITC Limited
Distribution & Channel Management, Promotion Decisions OF ITC LimitedDistribution & Channel Management, Promotion Decisions OF ITC Limited
Distribution & Channel Management, Promotion Decisions OF ITC Limited
Reyaz Jafar
 
Benihana of Tokyo, case study
Benihana of Tokyo, case studyBenihana of Tokyo, case study
Benihana of Tokyo, case study
Aamir chouhan
 
Sport Obermeyer Case Study
Sport Obermeyer Case StudySport Obermeyer Case Study
Sport Obermeyer Case Study
Gourav Anvekar
 
Group 10 soren chemical
Group 10   soren chemicalGroup 10   soren chemical
Group 10 soren chemical
Aswin Sridhar
 
Sports Obermeyer
Sports ObermeyerSports Obermeyer
Sports Obermeyer
saurabh kumar
 
Bbva marketing management case
Bbva marketing management caseBbva marketing management case
Bbva marketing management case
Sruti Seshadri
 
Hubspot Case Analysis
Hubspot Case AnalysisHubspot Case Analysis
Hubspot Case Analysis
Yemi Adejumo
 
Nestle Refrigerated Foods: Contadina Pasta & Pizza (A) - Case Analysis
Nestle Refrigerated Foods: Contadina Pasta & Pizza (A) - Case AnalysisNestle Refrigerated Foods: Contadina Pasta & Pizza (A) - Case Analysis
Nestle Refrigerated Foods: Contadina Pasta & Pizza (A) - Case Analysis
Nikhil Saraf
 
Ingersoll rand air compressor_india
Ingersoll rand air compressor_indiaIngersoll rand air compressor_india
Ingersoll rand air compressor_india
Bhabani Lenka
 
Jabong: Balancing the Demads of Customers and Suppliers
Jabong: Balancing the Demads of Customers and SuppliersJabong: Balancing the Demads of Customers and Suppliers
Jabong: Balancing the Demads of Customers and Suppliers
Saiteja Pamu
 
Colgate palmolive the precision toothbrush
Colgate palmolive the precision toothbrushColgate palmolive the precision toothbrush
Colgate palmolive the precision toothbrushRajendra Inani
 

What's hot (20)

Wesco case B2B case study
Wesco case B2B case studyWesco case B2B case study
Wesco case B2B case study
 
AJANTA PACKAGING.pptx
AJANTA PACKAGING.pptxAJANTA PACKAGING.pptx
AJANTA PACKAGING.pptx
 
Atlantic computer case analysis
Atlantic computer case analysisAtlantic computer case analysis
Atlantic computer case analysis
 
Colgate- Palmolive: Managing International Careers
Colgate- Palmolive: Managing International CareersColgate- Palmolive: Managing International Careers
Colgate- Palmolive: Managing International Careers
 
Pepsi Lipton Brisk - Harvard Business Review Case
Pepsi Lipton Brisk - Harvard Business Review CasePepsi Lipton Brisk - Harvard Business Review Case
Pepsi Lipton Brisk - Harvard Business Review Case
 
Atlantic Computers: A Bundle of Pricing Options
Atlantic Computers: A Bundle of Pricing OptionsAtlantic Computers: A Bundle of Pricing Options
Atlantic Computers: A Bundle of Pricing Options
 
Metabical - Marketing Case Study
Metabical - Marketing Case StudyMetabical - Marketing Case Study
Metabical - Marketing Case Study
 
Wal-Mart Stores in 2003 (HBS Case 9-704-430)
Wal-Mart Stores in 2003 (HBS Case 9-704-430)Wal-Mart Stores in 2003 (HBS Case 9-704-430)
Wal-Mart Stores in 2003 (HBS Case 9-704-430)
 
Virgin mobile USA pricing first time case analysis
Virgin mobile USA pricing first time case analysisVirgin mobile USA pricing first time case analysis
Virgin mobile USA pricing first time case analysis
 
Distribution & Channel Management, Promotion Decisions OF ITC Limited
Distribution & Channel Management, Promotion Decisions OF ITC LimitedDistribution & Channel Management, Promotion Decisions OF ITC Limited
Distribution & Channel Management, Promotion Decisions OF ITC Limited
 
Benihana of Tokyo, case study
Benihana of Tokyo, case studyBenihana of Tokyo, case study
Benihana of Tokyo, case study
 
Sport Obermeyer Case Study
Sport Obermeyer Case StudySport Obermeyer Case Study
Sport Obermeyer Case Study
 
Group 10 soren chemical
Group 10   soren chemicalGroup 10   soren chemical
Group 10 soren chemical
 
Sports Obermeyer
Sports ObermeyerSports Obermeyer
Sports Obermeyer
 
Bbva marketing management case
Bbva marketing management caseBbva marketing management case
Bbva marketing management case
 
Hubspot Case Analysis
Hubspot Case AnalysisHubspot Case Analysis
Hubspot Case Analysis
 
Nestle Refrigerated Foods: Contadina Pasta & Pizza (A) - Case Analysis
Nestle Refrigerated Foods: Contadina Pasta & Pizza (A) - Case AnalysisNestle Refrigerated Foods: Contadina Pasta & Pizza (A) - Case Analysis
Nestle Refrigerated Foods: Contadina Pasta & Pizza (A) - Case Analysis
 
Ingersoll rand air compressor_india
Ingersoll rand air compressor_indiaIngersoll rand air compressor_india
Ingersoll rand air compressor_india
 
Jabong: Balancing the Demads of Customers and Suppliers
Jabong: Balancing the Demads of Customers and SuppliersJabong: Balancing the Demads of Customers and Suppliers
Jabong: Balancing the Demads of Customers and Suppliers
 
Colgate palmolive the precision toothbrush
Colgate palmolive the precision toothbrushColgate palmolive the precision toothbrush
Colgate palmolive the precision toothbrush
 

Viewers also liked

Quantitative exercise-toasty oven
Quantitative exercise-toasty ovenQuantitative exercise-toasty oven
Quantitative exercise-toasty ovenwelcometofacebook
 
Class+3+ +quantitative+analysis+exercise+answer+key
Class+3+ +quantitative+analysis+exercise+answer+keyClass+3+ +quantitative+analysis+exercise+answer+key
Class+3+ +quantitative+analysis+exercise+answer+keywelcometofacebook
 
EVC exercise-novel motor oil
EVC exercise-novel motor oilEVC exercise-novel motor oil
EVC exercise-novel motor oilwelcometofacebook
 
distribution strategies calyx and corolla(4210)
distribution strategies calyx and corolla(4210)distribution strategies calyx and corolla(4210)
distribution strategies calyx and corolla(4210)welcometofacebook
 
Source code for view details(database)
Source code for view details(database)Source code for view details(database)
Source code for view details(database)welcometofacebook
 
Source code for insert multiple rows(database)
Source code for insert multiple rows(database)Source code for insert multiple rows(database)
Source code for insert multiple rows(database)welcometofacebook
 
Subnet questions with ans(networking)
Subnet questions with ans(networking)Subnet questions with ans(networking)
Subnet questions with ans(networking)welcometofacebook
 
Edited calyx and corolla case ppt
Edited calyx and corolla case pptEdited calyx and corolla case ppt
Edited calyx and corolla case pptnicerohit555
 
Source codes for alerts lovs and reports generation(database)
Source codes for alerts lovs and reports generation(database)Source codes for alerts lovs and reports generation(database)
Source codes for alerts lovs and reports generation(database)welcometofacebook
 
Souce code of validation trigger examples(database)
Souce code of validation trigger examples(database)Souce code of validation trigger examples(database)
Souce code of validation trigger examples(database)welcometofacebook
 
database design intro(database)
database design intro(database)database design intro(database)
database design intro(database)welcometofacebook
 
product and brand strategies(4210)
product and brand strategies(4210)product and brand strategies(4210)
product and brand strategies(4210)welcometofacebook
 

Viewers also liked (20)

Quantitative exercise-toasty oven
Quantitative exercise-toasty ovenQuantitative exercise-toasty oven
Quantitative exercise-toasty oven
 
EVC exercise-odi case
EVC exercise-odi caseEVC exercise-odi case
EVC exercise-odi case
 
jones blair calculations
jones blair calculationsjones blair calculations
jones blair calculations
 
Class+3+ +quantitative+analysis+exercise+answer+key
Class+3+ +quantitative+analysis+exercise+answer+keyClass+3+ +quantitative+analysis+exercise+answer+key
Class+3+ +quantitative+analysis+exercise+answer+key
 
EVC exercise-novel motor oil
EVC exercise-novel motor oilEVC exercise-novel motor oil
EVC exercise-novel motor oil
 
distribution strategies calyx and corolla(4210)
distribution strategies calyx and corolla(4210)distribution strategies calyx and corolla(4210)
distribution strategies calyx and corolla(4210)
 
Exercise2(database)
Exercise2(database)Exercise2(database)
Exercise2(database)
 
Source code for view details(database)
Source code for view details(database)Source code for view details(database)
Source code for view details(database)
 
Source code for insert multiple rows(database)
Source code for insert multiple rows(database)Source code for insert multiple rows(database)
Source code for insert multiple rows(database)
 
Subnet questions with ans(networking)
Subnet questions with ans(networking)Subnet questions with ans(networking)
Subnet questions with ans(networking)
 
Edited calyx and corolla case ppt
Edited calyx and corolla case pptEdited calyx and corolla case ppt
Edited calyx and corolla case ppt
 
Exercise4(database)
Exercise4(database)Exercise4(database)
Exercise4(database)
 
Source codes for alerts lovs and reports generation(database)
Source codes for alerts lovs and reports generation(database)Source codes for alerts lovs and reports generation(database)
Source codes for alerts lovs and reports generation(database)
 
Souce code of validation trigger examples(database)
Souce code of validation trigger examples(database)Souce code of validation trigger examples(database)
Souce code of validation trigger examples(database)
 
Exercise3(database)
Exercise3(database)Exercise3(database)
Exercise3(database)
 
database design intro(database)
database design intro(database)database design intro(database)
database design intro(database)
 
stp case jones blair(4210)
stp case jones blair(4210)stp case jones blair(4210)
stp case jones blair(4210)
 
Exercise1(database)
Exercise1(database)Exercise1(database)
Exercise1(database)
 
Exercise5(database)
Exercise5(database)Exercise5(database)
Exercise5(database)
 
product and brand strategies(4210)
product and brand strategies(4210)product and brand strategies(4210)
product and brand strategies(4210)
 

Similar to CLTV exercise-Instyle

Selling food to ontario and pricing for selling - Erica Pate
Selling food to ontario and pricing for selling - Erica PateSelling food to ontario and pricing for selling - Erica Pate
Selling food to ontario and pricing for selling - Erica Pate
Local Food
 
httpswww.azed.govoelaselpsUse this to see the English Lang.docx
httpswww.azed.govoelaselpsUse this to see the English Lang.docxhttpswww.azed.govoelaselpsUse this to see the English Lang.docx
httpswww.azed.govoelaselpsUse this to see the English Lang.docx
pooleavelina
 
The Giving Flower, Managerial Accounting
The Giving Flower, Managerial AccountingThe Giving Flower, Managerial Accounting
The Giving Flower, Managerial Accounting
Pierce McManus
 
מבוא לכלכלת סטארטאפים - רועי דויטש
מבוא לכלכלת סטארטאפים - רועי דויטשמבוא לכלכלת סטארטאפים - רועי דויטש
מבוא לכלכלת סטארטאפים - רועי דויטש
Roei Deutsch
 
Relative Impact: Volunteer ROI Part 1 – More volunteer hours is not always a ...
Relative Impact: Volunteer ROI Part 1 – More volunteer hours is not always a ...Relative Impact: Volunteer ROI Part 1 – More volunteer hours is not always a ...
Relative Impact: Volunteer ROI Part 1 – More volunteer hours is not always a ...
VolunteerMatch
 
business unit performance measurement is a way to measure a business performa...
business unit performance measurement is a way to measure a business performa...business unit performance measurement is a way to measure a business performa...
business unit performance measurement is a way to measure a business performa...
MengsongNguon
 
Churn and Customer LIfetime Value
Churn and Customer LIfetime ValueChurn and Customer LIfetime Value
Churn and Customer LIfetime Value
J. Scott Christianson
 
Customer Lifetime Value
Customer Lifetime ValueCustomer Lifetime Value
Customer Lifetime Value
JY Chun
 
Lecture_4_spring_2009.ppt
Lecture_4_spring_2009.pptLecture_4_spring_2009.ppt
Lecture_4_spring_2009.ppt
Paco Wong
 
Exercises with solutions CHAPTER 0104 (1).pdf
Exercises with solutions CHAPTER 0104 (1).pdfExercises with solutions CHAPTER 0104 (1).pdf
Exercises with solutions CHAPTER 0104 (1).pdf
MohamedAbdi347025
 
30 Years and Growing1$ at a time30years strong, or.docx
30 Years and Growing1$ at a time30years strong, or.docx30 Years and Growing1$ at a time30years strong, or.docx
30 Years and Growing1$ at a time30years strong, or.docx
tamicawaysmith
 
Week 5Break Even AnalysisRecipe 1 dozen pretzelsIngredientUnitsUn.docx
Week 5Break Even AnalysisRecipe 1 dozen pretzelsIngredientUnitsUn.docxWeek 5Break Even AnalysisRecipe 1 dozen pretzelsIngredientUnitsUn.docx
Week 5Break Even AnalysisRecipe 1 dozen pretzelsIngredientUnitsUn.docx
melbruce90096
 
Week 2 lecture demand & supply fall 2012
Week 2 lecture demand & supply fall 2012Week 2 lecture demand & supply fall 2012
Week 2 lecture demand & supply fall 2012Ali Madridista
 
Macro 2.3 inflation
Macro 2.3  inflationMacro 2.3  inflation
Macro 2.3 inflation
VICKYSUNDAR4
 
Macro 2.3 inflation
Macro 2.3  inflationMacro 2.3  inflation
Macro 2.3 inflation
VICKYSUNDAR4
 
Test review
Test reviewTest review
Test reviewbweldon
 
Amplify & MaRS DD - Financial Fundementals
Amplify & MaRS DD -  Financial FundementalsAmplify & MaRS DD -  Financial Fundementals
Amplify & MaRS DD - Financial Fundementals
Kyle Turriff
 
5.10.12 Feasibility of a Purchasing Co-op
5.10.12 Feasibility of a Purchasing Co-op5.10.12 Feasibility of a Purchasing Co-op
5.10.12 Feasibility of a Purchasing Co-op
CoopConnections
 
Ap macro inflation_teacher
Ap macro inflation_teacherAp macro inflation_teacher
Ap macro inflation_teacherniru15
 
Value investing for beginners
Value investing for beginnersValue investing for beginners
Value investing for beginners
Shinichiro Yano
 

Similar to CLTV exercise-Instyle (20)

Selling food to ontario and pricing for selling - Erica Pate
Selling food to ontario and pricing for selling - Erica PateSelling food to ontario and pricing for selling - Erica Pate
Selling food to ontario and pricing for selling - Erica Pate
 
httpswww.azed.govoelaselpsUse this to see the English Lang.docx
httpswww.azed.govoelaselpsUse this to see the English Lang.docxhttpswww.azed.govoelaselpsUse this to see the English Lang.docx
httpswww.azed.govoelaselpsUse this to see the English Lang.docx
 
The Giving Flower, Managerial Accounting
The Giving Flower, Managerial AccountingThe Giving Flower, Managerial Accounting
The Giving Flower, Managerial Accounting
 
מבוא לכלכלת סטארטאפים - רועי דויטש
מבוא לכלכלת סטארטאפים - רועי דויטשמבוא לכלכלת סטארטאפים - רועי דויטש
מבוא לכלכלת סטארטאפים - רועי דויטש
 
Relative Impact: Volunteer ROI Part 1 – More volunteer hours is not always a ...
Relative Impact: Volunteer ROI Part 1 – More volunteer hours is not always a ...Relative Impact: Volunteer ROI Part 1 – More volunteer hours is not always a ...
Relative Impact: Volunteer ROI Part 1 – More volunteer hours is not always a ...
 
business unit performance measurement is a way to measure a business performa...
business unit performance measurement is a way to measure a business performa...business unit performance measurement is a way to measure a business performa...
business unit performance measurement is a way to measure a business performa...
 
Churn and Customer LIfetime Value
Churn and Customer LIfetime ValueChurn and Customer LIfetime Value
Churn and Customer LIfetime Value
 
Customer Lifetime Value
Customer Lifetime ValueCustomer Lifetime Value
Customer Lifetime Value
 
Lecture_4_spring_2009.ppt
Lecture_4_spring_2009.pptLecture_4_spring_2009.ppt
Lecture_4_spring_2009.ppt
 
Exercises with solutions CHAPTER 0104 (1).pdf
Exercises with solutions CHAPTER 0104 (1).pdfExercises with solutions CHAPTER 0104 (1).pdf
Exercises with solutions CHAPTER 0104 (1).pdf
 
30 Years and Growing1$ at a time30years strong, or.docx
30 Years and Growing1$ at a time30years strong, or.docx30 Years and Growing1$ at a time30years strong, or.docx
30 Years and Growing1$ at a time30years strong, or.docx
 
Week 5Break Even AnalysisRecipe 1 dozen pretzelsIngredientUnitsUn.docx
Week 5Break Even AnalysisRecipe 1 dozen pretzelsIngredientUnitsUn.docxWeek 5Break Even AnalysisRecipe 1 dozen pretzelsIngredientUnitsUn.docx
Week 5Break Even AnalysisRecipe 1 dozen pretzelsIngredientUnitsUn.docx
 
Week 2 lecture demand & supply fall 2012
Week 2 lecture demand & supply fall 2012Week 2 lecture demand & supply fall 2012
Week 2 lecture demand & supply fall 2012
 
Macro 2.3 inflation
Macro 2.3  inflationMacro 2.3  inflation
Macro 2.3 inflation
 
Macro 2.3 inflation
Macro 2.3  inflationMacro 2.3  inflation
Macro 2.3 inflation
 
Test review
Test reviewTest review
Test review
 
Amplify & MaRS DD - Financial Fundementals
Amplify & MaRS DD -  Financial FundementalsAmplify & MaRS DD -  Financial Fundementals
Amplify & MaRS DD - Financial Fundementals
 
5.10.12 Feasibility of a Purchasing Co-op
5.10.12 Feasibility of a Purchasing Co-op5.10.12 Feasibility of a Purchasing Co-op
5.10.12 Feasibility of a Purchasing Co-op
 
Ap macro inflation_teacher
Ap macro inflation_teacherAp macro inflation_teacher
Ap macro inflation_teacher
 
Value investing for beginners
Value investing for beginnersValue investing for beginners
Value investing for beginners
 

More from welcometofacebook

competing in a global market(4210)
competing in a global market(4210)competing in a global market(4210)
competing in a global market(4210)welcometofacebook
 
distribution strategies(4210)
distribution strategies(4210)distribution strategies(4210)
distribution strategies(4210)welcometofacebook
 
overview of marketing strategy(4210)
overview of marketing strategy(4210)overview of marketing strategy(4210)
overview of marketing strategy(4210)welcometofacebook
 
Final exam review answer(networking)
Final exam review answer(networking)Final exam review answer(networking)
Final exam review answer(networking)welcometofacebook
 
Midterm review questions ans(networking)
Midterm review questions ans(networking)Midterm review questions ans(networking)
Midterm review questions ans(networking)welcometofacebook
 
IP adress and routing(networking)
IP adress and routing(networking)IP adress and routing(networking)
IP adress and routing(networking)welcometofacebook
 
Layer 2 switching fundamentals(networking)
Layer 2 switching fundamentals(networking)Layer 2 switching fundamentals(networking)
Layer 2 switching fundamentals(networking)welcometofacebook
 
Common types of networks(networking)
Common types of networks(networking)Common types of networks(networking)
Common types of networks(networking)welcometofacebook
 
Internetworking devices(networking)
Internetworking devices(networking)Internetworking devices(networking)
Internetworking devices(networking)welcometofacebook
 
Internetworking fundamentals(networking)
Internetworking fundamentals(networking)Internetworking fundamentals(networking)
Internetworking fundamentals(networking)welcometofacebook
 

More from welcometofacebook (20)

consumer behavior(4210)
consumer behavior(4210)consumer behavior(4210)
consumer behavior(4210)
 
competing in a global market(4210)
competing in a global market(4210)competing in a global market(4210)
competing in a global market(4210)
 
promotion strategies(4210)
promotion strategies(4210)promotion strategies(4210)
promotion strategies(4210)
 
pricing strategies(4210)
pricing strategies(4210)pricing strategies(4210)
pricing strategies(4210)
 
Pharmasim
PharmasimPharmasim
Pharmasim
 
distribution strategies(4210)
distribution strategies(4210)distribution strategies(4210)
distribution strategies(4210)
 
the birth of swatch(4210)
the birth of swatch(4210)the birth of swatch(4210)
the birth of swatch(4210)
 
stp(4210)
stp(4210)stp(4210)
stp(4210)
 
situational analysis(4210)
situational analysis(4210)situational analysis(4210)
situational analysis(4210)
 
quantitative analysis(4210)
quantitative analysis(4210)quantitative analysis(4210)
quantitative analysis(4210)
 
overview of marketing strategy(4210)
overview of marketing strategy(4210)overview of marketing strategy(4210)
overview of marketing strategy(4210)
 
Final exam review answer(networking)
Final exam review answer(networking)Final exam review answer(networking)
Final exam review answer(networking)
 
Midterm review questions ans(networking)
Midterm review questions ans(networking)Midterm review questions ans(networking)
Midterm review questions ans(networking)
 
IP adress and routing(networking)
IP adress and routing(networking)IP adress and routing(networking)
IP adress and routing(networking)
 
TCP/IP(networking)
TCP/IP(networking)TCP/IP(networking)
TCP/IP(networking)
 
Layer 2 switching fundamentals(networking)
Layer 2 switching fundamentals(networking)Layer 2 switching fundamentals(networking)
Layer 2 switching fundamentals(networking)
 
Common types of networks(networking)
Common types of networks(networking)Common types of networks(networking)
Common types of networks(networking)
 
Internetworking devices(networking)
Internetworking devices(networking)Internetworking devices(networking)
Internetworking devices(networking)
 
Internetworking fundamentals(networking)
Internetworking fundamentals(networking)Internetworking fundamentals(networking)
Internetworking fundamentals(networking)
 
Solution2(database)
Solution2(database)Solution2(database)
Solution2(database)
 

Recently uploaded

How to Make Your Trade Show Booth Interactive
How to Make Your Trade Show Booth InteractiveHow to Make Your Trade Show Booth Interactive
How to Make Your Trade Show Booth Interactive
Blue Atlas Marketing
 
Google Ads Vs Social Media Ads-A comparative analysis
Google Ads Vs Social Media Ads-A comparative analysisGoogle Ads Vs Social Media Ads-A comparative analysis
Google Ads Vs Social Media Ads-A comparative analysis
akashrawdot
 
Smart Tools, Smarter Business -15 AI Tools to Optimize Your Workflows from Id...
Smart Tools, Smarter Business -15 AI Tools to Optimize Your Workflows from Id...Smart Tools, Smarter Business -15 AI Tools to Optimize Your Workflows from Id...
Smart Tools, Smarter Business -15 AI Tools to Optimize Your Workflows from Id...
DigiMarCon - Digital Marketing, Media and Advertising Conferences & Exhibitions
 
Digital Strategy Master Class - Andrew Rupert
Digital Strategy Master Class - Andrew RupertDigital Strategy Master Class - Andrew Rupert
Etsy Marketing Guide - Tips For Selling Digital Products
Etsy Marketing Guide - Tips For Selling Digital ProductsEtsy Marketing Guide - Tips For Selling Digital Products
Etsy Marketing Guide - Tips For Selling Digital Products
kcblog21
 
Monthly Social Media News Update May 2024
Monthly Social Media News Update May 2024Monthly Social Media News Update May 2024
Monthly Social Media News Update May 2024
Andy Lambert
 
Trust Element Assessment: How Your Online Presence Affects Outbound Lead Gene...
Trust Element Assessment: How Your Online Presence Affects Outbound Lead Gene...Trust Element Assessment: How Your Online Presence Affects Outbound Lead Gene...
Trust Element Assessment: How Your Online Presence Affects Outbound Lead Gene...
Martal Group
 
Unknown to Unforgettable - The Art and Science to Being Irresistible on Camer...
Unknown to Unforgettable - The Art and Science to Being Irresistible on Camer...Unknown to Unforgettable - The Art and Science to Being Irresistible on Camer...
Unknown to Unforgettable - The Art and Science to Being Irresistible on Camer...
DigiMarCon - Digital Marketing, Media and Advertising Conferences & Exhibitions
 
May 2024 - VBOUT Partners Meeting Group Session
May 2024 - VBOUT Partners Meeting Group SessionMay 2024 - VBOUT Partners Meeting Group Session
May 2024 - VBOUT Partners Meeting Group Session
Vbout.com
 
The What, Why & How of 3D and AR in Digital Commerce
The What, Why & How of 3D and AR in Digital CommerceThe What, Why & How of 3D and AR in Digital Commerce
The What, Why & How of 3D and AR in Digital Commerce
PushON Ltd
 
Digital Marketing Training In Bangalore
Digital Marketing Training In  BangaloreDigital Marketing Training In  Bangalore
Digital Marketing Training In Bangalore
Honey385968
 
What’s “In” and “Out” for ABM in 2024: Plays That Help You Grow and Ones to L...
What’s “In” and “Out” for ABM in 2024: Plays That Help You Grow and Ones to L...What’s “In” and “Out” for ABM in 2024: Plays That Help You Grow and Ones to L...
What’s “In” and “Out” for ABM in 2024: Plays That Help You Grow and Ones to L...
Demandbase
 
How to use Short Form Video To Grow Your Brand and Business - Keenya Kelly
How to use Short Form Video To Grow Your Brand and Business - Keenya KellyHow to use Short Form Video To Grow Your Brand and Business - Keenya Kelly
How to use Short Form Video To Grow Your Brand and Business - Keenya Kelly
DigiMarCon - Digital Marketing, Media and Advertising Conferences & Exhibitions
 
The New Era Of SEO - How AI Has Changed SEO Forever - Danny Leibrandt
The New Era Of SEO - How AI Has Changed SEO Forever - Danny LeibrandtThe New Era Of SEO - How AI Has Changed SEO Forever - Danny Leibrandt
The New Era Of SEO - How AI Has Changed SEO Forever - Danny Leibrandt
DigiMarCon - Digital Marketing, Media and Advertising Conferences & Exhibitions
 
Why People Fail in Network Marketing Business
Why People Fail in Network Marketing BusinessWhy People Fail in Network Marketing Business
Why People Fail in Network Marketing Business
Harish Kumar
 
Mastering Dynamic Web Designing A Comprehensive Guide.pdf
Mastering Dynamic Web Designing A Comprehensive Guide.pdfMastering Dynamic Web Designing A Comprehensive Guide.pdf
Mastering Dynamic Web Designing A Comprehensive Guide.pdf
Ibrandizer
 
Winning local SEO in the Age of AI - Dennis Yu
Winning local SEO in the Age of AI - Dennis YuWinning local SEO in the Age of AI - Dennis Yu
Turn Digital Reputation Threats into Offense Tactics - Daniel Lemin
Turn Digital Reputation Threats into Offense Tactics - Daniel LeminTurn Digital Reputation Threats into Offense Tactics - Daniel Lemin
Turn Digital Reputation Threats into Offense Tactics - Daniel Lemin
DigiMarCon - Digital Marketing, Media and Advertising Conferences & Exhibitions
 
Gokila digital marketing| consultant| Coimbatore
Gokila digital marketing| consultant| CoimbatoreGokila digital marketing| consultant| Coimbatore
Gokila digital marketing| consultant| Coimbatore
dmgokila
 

Recently uploaded (20)

How to Make Your Trade Show Booth Interactive
How to Make Your Trade Show Booth InteractiveHow to Make Your Trade Show Booth Interactive
How to Make Your Trade Show Booth Interactive
 
Mastering Email Campaign Automation Strategies and Best Practices - Michelle...
Mastering Email Campaign Automation Strategies and Best Practices  - Michelle...Mastering Email Campaign Automation Strategies and Best Practices  - Michelle...
Mastering Email Campaign Automation Strategies and Best Practices - Michelle...
 
Google Ads Vs Social Media Ads-A comparative analysis
Google Ads Vs Social Media Ads-A comparative analysisGoogle Ads Vs Social Media Ads-A comparative analysis
Google Ads Vs Social Media Ads-A comparative analysis
 
Smart Tools, Smarter Business -15 AI Tools to Optimize Your Workflows from Id...
Smart Tools, Smarter Business -15 AI Tools to Optimize Your Workflows from Id...Smart Tools, Smarter Business -15 AI Tools to Optimize Your Workflows from Id...
Smart Tools, Smarter Business -15 AI Tools to Optimize Your Workflows from Id...
 
Digital Strategy Master Class - Andrew Rupert
Digital Strategy Master Class - Andrew RupertDigital Strategy Master Class - Andrew Rupert
Digital Strategy Master Class - Andrew Rupert
 
Etsy Marketing Guide - Tips For Selling Digital Products
Etsy Marketing Guide - Tips For Selling Digital ProductsEtsy Marketing Guide - Tips For Selling Digital Products
Etsy Marketing Guide - Tips For Selling Digital Products
 
Monthly Social Media News Update May 2024
Monthly Social Media News Update May 2024Monthly Social Media News Update May 2024
Monthly Social Media News Update May 2024
 
Trust Element Assessment: How Your Online Presence Affects Outbound Lead Gene...
Trust Element Assessment: How Your Online Presence Affects Outbound Lead Gene...Trust Element Assessment: How Your Online Presence Affects Outbound Lead Gene...
Trust Element Assessment: How Your Online Presence Affects Outbound Lead Gene...
 
Unknown to Unforgettable - The Art and Science to Being Irresistible on Camer...
Unknown to Unforgettable - The Art and Science to Being Irresistible on Camer...Unknown to Unforgettable - The Art and Science to Being Irresistible on Camer...
Unknown to Unforgettable - The Art and Science to Being Irresistible on Camer...
 
May 2024 - VBOUT Partners Meeting Group Session
May 2024 - VBOUT Partners Meeting Group SessionMay 2024 - VBOUT Partners Meeting Group Session
May 2024 - VBOUT Partners Meeting Group Session
 
The What, Why & How of 3D and AR in Digital Commerce
The What, Why & How of 3D and AR in Digital CommerceThe What, Why & How of 3D and AR in Digital Commerce
The What, Why & How of 3D and AR in Digital Commerce
 
Digital Marketing Training In Bangalore
Digital Marketing Training In  BangaloreDigital Marketing Training In  Bangalore
Digital Marketing Training In Bangalore
 
What’s “In” and “Out” for ABM in 2024: Plays That Help You Grow and Ones to L...
What’s “In” and “Out” for ABM in 2024: Plays That Help You Grow and Ones to L...What’s “In” and “Out” for ABM in 2024: Plays That Help You Grow and Ones to L...
What’s “In” and “Out” for ABM in 2024: Plays That Help You Grow and Ones to L...
 
How to use Short Form Video To Grow Your Brand and Business - Keenya Kelly
How to use Short Form Video To Grow Your Brand and Business - Keenya KellyHow to use Short Form Video To Grow Your Brand and Business - Keenya Kelly
How to use Short Form Video To Grow Your Brand and Business - Keenya Kelly
 
The New Era Of SEO - How AI Has Changed SEO Forever - Danny Leibrandt
The New Era Of SEO - How AI Has Changed SEO Forever - Danny LeibrandtThe New Era Of SEO - How AI Has Changed SEO Forever - Danny Leibrandt
The New Era Of SEO - How AI Has Changed SEO Forever - Danny Leibrandt
 
Why People Fail in Network Marketing Business
Why People Fail in Network Marketing BusinessWhy People Fail in Network Marketing Business
Why People Fail in Network Marketing Business
 
Mastering Dynamic Web Designing A Comprehensive Guide.pdf
Mastering Dynamic Web Designing A Comprehensive Guide.pdfMastering Dynamic Web Designing A Comprehensive Guide.pdf
Mastering Dynamic Web Designing A Comprehensive Guide.pdf
 
Winning local SEO in the Age of AI - Dennis Yu
Winning local SEO in the Age of AI - Dennis YuWinning local SEO in the Age of AI - Dennis Yu
Winning local SEO in the Age of AI - Dennis Yu
 
Turn Digital Reputation Threats into Offense Tactics - Daniel Lemin
Turn Digital Reputation Threats into Offense Tactics - Daniel LeminTurn Digital Reputation Threats into Offense Tactics - Daniel Lemin
Turn Digital Reputation Threats into Offense Tactics - Daniel Lemin
 
Gokila digital marketing| consultant| Coimbatore
Gokila digital marketing| consultant| CoimbatoreGokila digital marketing| consultant| Coimbatore
Gokila digital marketing| consultant| Coimbatore
 

CLTV exercise-Instyle

  • 1. UPDATED: Customer Lifetime Value Exercise: In Style 2 A direct catalog retailer of fashion goods, In Style, is trying to attract new customers by sending out catalogs. The cost of sending a catalog (which includes production and mailing) is $5. From experience, In Style anticipates the percentage of individuals who receive the catalog and purchase from it to be 5%. The average order placed with the company is $150. The margin for all products is about 70%, order processing is about $10 per order, and delivery/shipment costs is about $15 per order. Assume that each of the customers acquired will stay with the company for 5 years. Each year, In Style tries to retain these customers by sending a monthly catalog and the cost of sending out each catalog is $10. Historical records show that the response rate for these existing customers is about 20%. What is the CLTV of an In Style customer? Note: Assume a discount rate of 10% (i = 10%) in making the calculation.
  • 2. Customer Lifetime Value Exercise Solution 1. Net acquisition cost of an InStyle customer: Acquisition cost = $5 per catalog / 5% response rate = $100 Contribution = Order Value – Variable Costs Order Value = $150 per order Variable Costs = ($150 * (1 – 70% margin)) + $10 processing cost per order + $15 delivery/shipment cost per order. = $150 – $70 = $80 Net acquisition cost = $100 - $80 = $20 per customer 2. Total discounted net value of an InStyle customer: Year 1 Year 2 Year 3 Year 4 Year 5 Cost $10 per catalog * 12 months = $120 $120 $120 $120 $120 Contribution $80 contribution/order * 20% response rate * 12 months = $192 $192 $192 $192 $192 Net value $192- $120 = $72 $72 $72 $72 $72 Discounted net value $72/1.1 $72/(1.1^2) $72/(1.1^3) $72/(1.1^4) $72/(1.1^5) Total discounted net value = $272. 94 per customer 3. CLTV of an InStyle customer: = $272.94 - $20 = $252.94 per customer