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Assume that a customer in the small contractor target market segment buys an electric drill on average every five years (or every 0.2 year) for $100, when the gross margin on the drill averages 50 percent. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Questions 1. What is the value of a loyal customer (VLC) if the customer retention rate is 60 percent? Round your answer to the nearest cent. 2. What is the value of a loyal customer (VLC) if the customer retention rate increases to 80 percent? Round your answer to the nearest cent. 3. What is a 1 percent change in market share worth to the manufacturer if it represents 100,000 customers? Round your answers to the nearest dollar. 60 percent customer retention rate case: $ 80 percent customer retention rate case: $ D E Value of a Loyal Customer Revenue per unit Percent contribution margin to profit and overhead Repurchase frequency (purchases/year) Customer retention rate Number of customers representing 1 percent market share $100.00 50% 0.2 0.6 100,000 Buyer's life cycle Formulas #N/A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 VLC Value of a 1 percent change in market share #N/A #N/A Customer retention rate 0.8 Buyer's life cycle #N/A VLC Value of a 1 percent change in market share #N/A #N/A 22

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