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%

without discounting cash flows to take into account the time value of money, how soon will MBC break even on the following customers? In all cases, assume that revenues and variable costs to staff the cages occur on an ongoing basis but that the acquisition costs are a one-time event.

a. little leaguers

b. summer sluggers

c. elite ballplayers (print ad)

d. elite ballplayers (party)

e. entertainment seekers

Answer 1

	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

	Little Leaguers	Summer Sluggers	Elite Ballplayers (Print Ad)	Elite Ballplayers (Party)	Entertainment Seekers
Break Even	3rd	3rd	4th	3rd	2nd
Break Even NPV	3rd	4th	4th	3rd	3rd
Lifetime Value of Customer	5555.68	955.90	5916.08	15916.08	177.45