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MKTG 4600-001
Crayden Dalvit, Devin Healey, Michael Barski, Ezequiel Garcia, Robert Kingston, Trevor Reilly
November 8, 2021
Northern Aero Case Study: Customer Lifetime Value
Northern Aero is an airline company that was established and is now based in Scandinavia. In 2008, Jannick Jorgensten replaced longtime CMO, David Vlock. Jorgensten was tasked in researching and solving a problem that Northern Aero had been facing. A problem that posed whether or not Northern Aero’s customer loyalty program was creating enough profit to justify the massive expense that it had on their company. This was also a problem of finding Customer Lifetime Value and weighing the impact that expenses from their customer loyalty program was having on their company, and how Northern Aero could make more money from this program.
Question 1
The customer lifetime values of each segment have been calculated using the data from the “Current” block of data, with a discount factor of 15%. As you can see, the top 20%
Platinum members have the highest customer lifetime value.
Question 2
One key difference relates to the Customer Base Valuation. With a discount rate of 15%, the base is valued as $14,279,572; however, with a 40% discount rate, the valuation is only $8,969,159. Similarly, the discounted net margin and the long-term cumulated margin are significantly lower with this higher discount rate. The main takeaways from this are that when companies use higher discount rates, the future revenues of customers are proportionally less valuable.
Question 4
The results provided by the ZENITH consulting team show that a shift toward loyalty program spending that focuses on high-value customers will produce higher gross margins when compared to the gross margins created by inactive members, as well as the bottom 80% of Silver members. Notably, the top 20% of Platinum members produces gross margins of 4410 with just 200 customers. The ‘break-even’ point of the loyalty program for Northern Aero is at the top 20% of Gold members - where the number of customers matches gross margins. After that, gross margins greatly diminish, with the bottom 20% of Silver members only bringing in gross margins of 16.4.
Other supporting data shows that 39% of the top 20% of Platinum members will retain their Platinum status for the next year. Moreover, 11% of the bottom 80% of Platinum members will move up into the top 20%, with 33% maintaining their status in the bottom 80%. Conversely, 60% of the bottom 80% of Silver members will lose their status for the next year, ultimately becoming Inactive customers. Moreover, Inactive customers produce gross margins of -2, which means that the bottom 80% of Silver members is not
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Related Questions
The COVID-19 pandemic dramatically affects the aviation industry, which brings the sharpest decline of passenger demands. It also causes increasing incidents from every aspect of aviation industry, due to the changes of operational environments. The situation will continue to evolve until a “new normal” is reached. Upon your own understanding of the impact of COVID19 on aviation industry, please list five possible safety issues during the pandemic, or in the recovery process, or in the “new normal” period.
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SM Prime Holdings Inc. announced that its Board of Directors has approved the declaration of cash dividends of P0.185 per share worth a total of P5.34 billion.
“Management sees it best to conserve our resources as we strive to strike a balance between protecting the interest of our stakeholders and maintaining a sustainable growth trajectory for the company over the long-term,” Lim added.
Despite the overwhelming impact of COVID-19, Lim said SM Prime remains optimistic about an eventual recovery in consumer spending, owing to the resilience of the Filipino people.
Meanwhile, the Company’s financial position will allow it to carry on with its planned expansions in the second half of 2020 moving forward.
SM Prime’s P80 billion planned capital expenditures for 2020 remains intact for the year as it focuses on nearly completed projects seen to bring about sustainable returns. At the same time, SM Prime will continue to explore opportunistic acquisitions and investments that are well within…
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past two years, CIC estimated that it had squandered over $15 million on poorly
developed or failed projects. Every time a new project venture fails, the company
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- The way those functions/services might be impacted by each of these disasters
- Which services or functions would be affected first
- The minimum functions/services that must be maintained for that company
- Which service should be restored first
- What safeguards can be put in place to minimize the impact
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1. Implementation of Return and Exchange Policy
2. Hire a Quality Assurance Specialist
3. Conduct an Actual Investigation and Technical Observation, then Provide a solution to the problems detected.
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SCENARIO 2: Misleading for Good Purpose
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- 4. Determine a strategy for Wal-Mart to improve online sales. 5. Write a report to management that describes the primary cause of the problems, a detailed plan to solve them, and show how the plan solves the problems and describe any other benefits it will providearrow_forwardPrepare a proposal that covers the following: The logistics team decided that missing guaranteed deadlines and late delivery of goods and increase in the motor vehicles gas bill are identifiable control problems. You are asked to analyse (examine methodically and in detail the constitution or structure of (something, especially information), typically for purposes of explanation and interpretation.these issues and present your evaluation (the making of a judgment about the amount, number, or value of something; assessment.) of these, as well as present one resolution (a firm decision to do or not to do something) to each issue mentioned.arrow_forwardAccording to the case study, what would be each of the parties’ point of view - Lauren's as well as the CEO's? Why or why not should they to go through with the sale?arrow_forward
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