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Club Fitness is open from 5 A.M. until 9 P.M. Monday through Saturday. The gym is...

Club Fitness is open from 5 A.M. until 9 P.M. Monday through Saturday. The gym is closed on Sundays and holidays. Hank Hunkley, the owner, is considering offering 24-hour, 7-day-a-week, 365-days-a year access for an additional $59 a year per member. In exchange for the extra fee, the member would receive a magnetic fob that will unlock the door when the facility is closed. Each fob would cost Hank $5. Based on a survey taken of his 951 current members, Hank estimates that 36% of them will buy the fob to allow extended hours access. What is the total CLV associated with the 24/7/365 access plan for the current membership if the costs for personnel and equipment for the program are $9,548 annually?

Please post the Excel formula

Solutions

Expert Solution

   COMPUTATION OF CUSTOMER LIFE TIME VALUE                  
                      
NUMBER OF MEMBERS =                   951  
ESTIMATED MEMBERS OPT THE PLAN   =                   342   (951*36%)
FOB COST =                   1710   (5*342)
ADDITIONAL PACKAGE REVENUE =                   20178   (342*59)
PERSONNEL & EQUIPMENT COST FOR PROGRAMME =                   9548  
                      
CLV = (ANNUAL REVENUE PER CUSTOMER - CUSTOMER ACQUISITION COST)                      
=   (20178-9548-1710)                  
=   $8,920                
                      

ekkarill92 answered 2 years ago
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