Question

	Little Leaguers	Summer Sluggers	Elite Ballplayers (Print Ad)	Elite Ballplayers (Party)	Entertainment Seekers
Contact Cost	¥1,000	¥1,500	¥300	¥12,500	¥50
Response Rate	10.0%	15.0%	0.5%	25.0%	2.5%
Acquisition Cost	10,000	10,000	60,000	50,000	2,000
Workers Needed	2	1	1	1	2
Worker Labor Cost	¥1,500	¥1,500	¥1,500	¥1,500	¥1,500
Instructors Needed	1	0	1	1	0
Instructor Hourly Labor Cost	¥3,000	N/A	¥4,500	¥4,500	N/A
Total Cost Per Hour	6,000	1,500	6,000	6,000	3,000
Hourly Price Charged	¥6,500	¥3,000	¥7,500	¥7,500	¥4,000
Hourly Margin ¥	500	1,500	1,500	1,500	1,000
Hourly Margin %	8%	100%	25%	25%	33%
Annual Hours	10.0	4.0	20.0	20.0	1.5
Annual Margin ¥	5,000	6,000	30,000	30,000	1,500
Retention Rate	75.0%	50.0%	60.0%	60.0%	35.0%
Interest Rate	10.0%

taking into account the time value of money and assuming that 100 percent of a customer will have experienced attrition once the net present value of annual profits per customer falls below Y100, what is the lifetime value to MBC of the following customers? Assume that a customer's lifetime extends up to and including the year in which the net present value of annual profits falls below Y100.

a. little leaguer

b. summer slugger

c. elite ballplayer (print ad)

d. elite ballplayer (party) i. should MBC throw the gala event?

e. entertainment seeker

Answer 1

a. A little Leaguer: year 15 the NPV annual profit per customer falls below 100. The lifetime value per customer at that time is 8848.32 yen. (9733/(1+.1)15)-10000

b. A Summer Slugger: year 7 the NPV annual profit per customer falls below 100. The lifetime value per customer at that time is 1732.95 yen (1906/(1+.1)7)-10000

c. An Elite Ballplayer if MBC places the ad in the ball enthusiast magazine: year 12 the NPV annual profit per customer falls below 100. The lifetime value per customer at that time is 13487.95 yen (13547.31/(1+.1)12)-60000

d. An Elite Ballplayer if MBC purchases the list and invites all target customers to the gala event: year 12 the NPV annual profit per customer falls below 100. The lifetime value per customer at that time is 22578.86 yen (22638.22/(1+.1)12)-50000

e. An Entertainment Seeker: year 4 the NPV annual profit per customer falls below 100. The lifetime value per customer at that time is 248 yen (273/(1+.1)4)-2000