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   Lifetime Value of a Customer (Sample Exercise)

Analysis
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
50.00
100.00
150.00
150.00
150.00
00.00
00.00
00.00
00.00
00.00
Discount Rate
15
%
  
Present Value Multiplier
1.00
0.87
0.76
0.66
0.57
0.50
0.43
0.38
0.33
0.28
0.25
Net Present Value
-$250.00
50.00
100.00
150.00
150.00
150.00
00.00
00.00
00.00
00.00
00.00
Lifetime Value
of Customer
128.06
  
Starting Data
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
50.00
100.00
150.00
150.00
150.00
00.00
00.00
00.00
00.00
00.00
Discount Rate
15
%
  
Present Value Multiplier
1.00
0.87
0.76
0.66
0.57
0.50
0.43
0.38
0.33
0.28
0.25
Net Present Value
-$250.00
50.00
100.00
150.00
150.00
150.00
00.00
00.00
00.00
00.00
00.00
Lifetime Value
of Customer
128.06
  
Comments:
Market-Based Management Application Exercises is a © copyright 2010 product developed and owned by Dr. Roger J. Best.
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