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BugKillers provides a quarterly pest control service for $106 a quarter. Its variable costs per service...

BugKillers provides a quarterly pest control service for $106 a quarter. Its variable costs per service call are $17. Customers can cancel the service at any time, and the firm has a quarterly attrition rate of 2%. Marketing spends $40 per year on customer retention. If the annual discount rate is 13%, what is the CLV of an existing customer?

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Pest Control Service per annum (106*4) $                      424
Less: Variable Cost per Service Call (17*4) $                        68
Less: Marketing Spend $                        40
Average Customer Contribution pa $                      316
Average Customer profit p.a. $           316
Customer Attrition Rate (.02*4) 8%
Customer Retention Rate (1-8%) 92%
Average Life Time in Years (1/8%) 13
Likely Customer Profit (316*92%) $     290.72
Yr-1 Yr-2 Yr-3 Yr-4 Yr-5 Yr-6 Yr-7 Yr-8 Yr-9 Yr-10 Yr-11 Yr-12 Yr-13
Discount Rate 1.13 1.28 1.44 1.63 1.84 2.08 2.35 2.66 3.00 3.39 3.84 4.33 4.90
CLV-Per Year 257.27 227.68 201.48 178.30 157.79 139.64 123.57 109.36 96.78 85.64 75.79 67.07 59.35
Cummulative CLV 257.27 484.95 686.43 864.74 1022.53 1162.17 1285.74 1395.10 1491.87 1577.52 1653.31 1720.38 1779.73

ekkarill92 answered 2 years ago
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