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Western Athletic Club International (WACI) owns and operates a chain of fitness clubs and is interested in estimating the CLV for new memberships. Practically all of WACI's costs are fixed costs. Meaning that, when a member pays his or her monthly dues, there are no variable costs associated with that payment and all the revenues go toward covering the fixed costs of the business (facilities, salaries, equipment, etc.) WACI's monthly membership dues are $63 per person.
The average member keeps his or her membership active for 19 months. In addition to membership, WACI also offers personal training services through a staff of independent athletic trainers. WACI and the trainer split the fees associated with personal training 50/50. Historically, 11% of members choose to use a personal trainer for, on average, 20 training sessions. Sessions with a personal trainer are priced at $70 each.
What would be the net value (or incremental value) of implementing a program that doubled the likelihood that a person would hire a personal trainer?
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