For the information given, rank the customers in terms of Customer Lifetime Valu
ID: 445379 • Letter: F
Question
For the information given, rank the customers in terms of Customer Lifetime Value.
Avg. Annual Sales
Avg. Profit Margin
Expected Lifetime
Customer A
$2,000
15%
8 years
Customer B
$3,000
20%
6 years
Customer C
$4,000
15%
4 years
Suppose the discount rate is 6%. Which customer has the highest CLV and which has the lowest CLV? For full credit, please provide at least one step of calculation and the correct CLV for each customer. (12 points)
Avg. Annual Sales
Avg. Profit Margin
Expected Lifetime
Customer A
$2,000
15%
8 years
Customer B
$3,000
20%
6 years
Customer C
$4,000
15%
4 years
Explanation / Answer
CLV of customer A= 2000*6.210=$12,420
CLV of customer B= 3000*4.917=$14,751
CLV of customer C= 4000*3.465= $ 13,860
customer B profit= 14,751*0.20= $2950
customer B is having higher profits than the remaining two.