Answer to Question #115678 in Economics for ALI

Question

In January, 300 people sign up for a dance studio membership. What is the present value of
total net profit from January to May for this cohort of dancers? (Show calculations)
Monthly Margin $175 per customer
Monthly Retention Spending $25
Monthly Retention Rate 70%

Q2- Consider a weekly cleaning service, where billing is done at the end of the week. What is the
CLV for an average customer? (Show calculations)
Weekly Margin $80
Annual Retention Spending $1040
Weekly Retention 96%
Discount Rate 2%

Q3- You are trying to maximize CLV based on the following information. How much should you
spend on marketing and retention (R) to maximize CLV? Justify. (Show calculations for each
scenario)

Data:
M = $50
d = .01
a) If R = $49, then r = 99%
b) If R = $40, then r = 90%
c) If R = $30, then r = 75%
d) If R = $20, then r = 60%
e) If R = $10, then r = 50%

Answer 1

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