Introduction : How To Use

How to Use: For each Marketing Performance Tools the questions presented in the text are restated. The data provided in the text is all that is needed to answer the questions. Change the input cells as needed to answer the questions posed. Print the results as you go along. Also, experiment with the data to learn more about the dynamics of this marketing analysis. For your own user analysis you will need to replace all the input cells in the interactive spreadsheets.

Sample Exercise: It cost $250 to acquire a customer and $50 per year to retain that customer. The customer life is currently five years. The customer margin is $100 in year 1 and increases at a rate of $50 per year until it reaches $200. The company uses a 15% discount rate to compute the life time value of a customer.

Question 1: How would the Life Time Value of a Customer change if the acquisition cost increased from $250 to $500?

Question 2: How would the Life Time Value of a Customer change if the customer life decreased from 5 years to 4 years?

Experiment: Change other yellow input cells to see how the Life Time Value of a Customer changes.

Lifetime Value of a Customer

Customer Retention	80.00%
Customer Life	5
Year	0	1	2	3	4	5	6	7	8	9	10
Customer Margin	$0 $	$100 $	$150 $	$200 $	$200 $	$200 $	$0 $	$0 $	$0 $	$0 $	$0 $
Acqusition Cost	-$250 $	$0 $	$0 $	$0 $	$0 $	$0 $	$0 $	$0 $	$0 $	$0 $	$0 $
Retention Cost	$0 $	-$50 $	-$50 $	-$50 $	-$50 $	-$50 $	$0 $	$0 $	$0 $	$0 $	$0 $
Net Profit	-$250.00
Discount Rate	15% %
Present Value Multiplier	1.00
Net Present Value	-$250.00
Lifetime Value of Customer	$260.23