Q1: Shannon’s brewery currently boasts a customer base of 1,750 customers that frequent the brewhouse on average twice per month and spend $28 per visit. Shannon ‘s current variable cost of goods sold is 50% of sales. The customer retention rate per month is 0.84, based on data collected from its website and an analysis of credit card receipts. Its current cost of capital for borrowing and investing is about 12% per year, or 1% per month. What is Shannon’s approximate CLV for its average customer? Compute your answer to the nearest penny.
Q2: Assume that Shannon’s decides to move forward with its loyalty/rewards program. Estimates for the cost per customer are $3.2 per month. Average customer margins, before subtracting off the cost of the loyalty/rewards program, are expected to be $36 per customer per month with a boost in retention to 82% per month. What is the resulting CLV if the annual interest rate for discounting cash flows remains the same as in Q1? Compute your answer to the nearest dollar.
Q3: Assume that Shannon’s current CLV=$142.00. Based on the change in CLV you computed in the last question, should Shannon’s implement the rewards program?
Group of answer choices
Yes -- introduce rewards program.
No -- do not introduce rewards program
There is insufficient data to answer "yes" or "no."
Q4: Assume that Shannon’s decides to move forward with its loyalty/rewards program. Estimates for the cost per customer is $6.29 per month. Average customer margins, before subtracting off the cost of the loyalty/rewards program, are expected to be 33.02. Assuming that Shannon’s wishes to obtain a minimum CLV of $120, what is the required retention rate that must be achieved? Assume that the interest rate is 1% per month. (Note: This problem assumes that you employ some algebra to solve the CLV formula for r.) Round your answer to four decimal places (e.g., .12345 rounds to .1235). Do not express in percent form.