use the excel template vlc to find the average value of a loyal customer (vlc) in a target market segment if…

use the excel template vlc to find the average value of a loyal customer (vlc) in a target market segment if the average purchase price is $60 per visit, the frequency of repurchase is seven times per year, the contribution margin is 10 percent, and the average customer defection rate is 20 percent? round your answer to the nearest dollar.

use the excel template vlc to find the average value of a loyal customer (vlc) in a target market segment if the average purchase price is $60 per visit, the frequency of repurchase is seven times per year, the contribution margin is 10 percent, and the average customer defection rate is 20 percent? round your answer to the nearest dollar.

Answer

Explanation:

Step1: Calculate annual purchase amount

The average purchase per visit is $60 and frequency is 7 times per year. So the annual purchase amount $A = 60\times7=420$.

Step2: Calculate annual contribution margin

The contribution - margin is 10% or 0.1. So the annual contribution margin $C = A\times0.1=420\times0.1 = 42$.

Step3: Calculate the VLC

The formula for the average value of a loyal customer (VLC) is $VLC=\frac{C}{d}$, where $d$ is the customer defection rate. Here, $d = 0.2$. So $VLC=\frac{42}{0.2}=210$.

Answer:

210