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For this assignment, let's assume the following:
High Effort
$250000
Low Effort
$50000
Future CLV Grouping
CLV Low
CLV Med
CLV High
Current CLV grouping
0.65
0.25
0.1
0.8
0.15
0.05
0.5
0.2
0.6
0.75
0.7
How many customers would be in the respective groups based on the above Markov matrices? Would what would the return on the marketing investment be for low effort and high effort marketing, if we base CLV on the average of the different groupings (calculated above). Should the firm invest in low effort or high effort? Explain.
5. Create two Pivot Tables to show: a) How average CLV changes across customer frequency groups, and b) How average CLV changes across customer recency groups. (You will need to create grouping variables on frequency and recency. What would be good cut points for these data? Recall that frequency is numerical and recency relates to days since purchase, so your categories should make sense from that perspective).
6. If you were working for the firm where this data was generated, how would you advise them to react to this information in terms of marketing activities? Provide a one-page memo to your fictitious manager outlining your rationale for how the firm should react to your analysis.
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