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Question
If we know that the average revenue of a particular manufacturing product is $75, ?'equency of repurchase is six times per year, contribution margin is 10%, and average customer defection rate is 25%:
1. What is the average value of a loyal customer (VLC) in a target market segment?
2. Analyse how the value of a loyal customer (VLC) will change if the average customer defection rate varies between 15% and 40% (in increments of 5%) and the frequency of repurchase varies between 3, 4, 5, 6, 7, 8 and 9 times per year. Plot the graph or use Excel table to illustrate the impact of these assumptions on the VLC.
3. Explain in your own words the impact of average customer defection rate and frequency of repurchase. What have you learned from this VLC?
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