1). Moonstruck sells fat-tire bicycles.
An average customer for Moonstruckbuys a bicycles every five years and spends $500 every time theybuy one. An average customer also spends $250 in parts andservice.
An excellent customer buys 8 bicyclesin their life time and spends $800 every time they buy one. Anexcellent customer spends $500 in parts and service very year.
The average profit margin forMoonstruck on its bicycles is 25%.
The average profit margin forMoonstruck on service and parts is 50%.
Moonstruck customers buy their firstbicycle when they are 30 and ride bicycles until they are 80 yearsof age.
- What is the Customer LifeTime Value of an average customer whois 30 years of age?
- What is the Customer LifeTime Value of an excellent customerwho is 45 years of age?
- Would you advise Moonstruck to spend $1 million dollars on amarketing program that would turn 1,000 average customers age 50into a 1,000 excellent customers?
2). Moonstruck has been tracking behavior of its customers.Below is a table showing three of their customers. Specify how youwould recommend Moonstruck to deal with each of them.
Customer Name | Recency | Frequency | Monetary |
Deshaies | 1 | 5 | 5 |
Yang | 5 | 5 | 5 |
Perez | 5 | 5 | 1 |
- DESHAIES:
- YANG:
- PEREZ:
3). Moonstruck is interested to maximize the Customer Life TimeValue. What are the variables that management can manipulate to tryto maximize CLTV, i.e., make CLTV as large as possible?
4) What are the applications of Market Basket Analysis? Give twoexamples.
