Essay about Retail Relays Case

2006 Words Mar 14th, 2016 9 Pages
Retail Relay Case (A)

MARK 70350-02

Customer Relationship Management

Professor Shankar Ganesan

Matt Beck, Bill Brunner, Stephanie Rearick, James Wine

Case: Retail Relays (A) (UV 5738)

1. What is the expected customer lifetime value of a newly acquired customer? Use an annual discount rate of 10%.

The expected customer lifetime value (CLV) for a newly acquired Retail Relay customer varied according to the study conducted. In the pilot study, the CLV was $24.21 while the full study revealed a CLV of $11.44. As the pilot study was more comprehensive in regards to customer buying trends, a good approximation of CLV would be near the $20 mark.
The first step in calculating CLV for both studies was to adjust Retail
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Of these 81 customers, they found an attrition rate of 32% after the first purchase. As opposed to the pilot study, the full study randomly selected 587 customers, regardless of when they had made their first purchase. This larger sample potentially included many participants who had only recently become familiar with Retail Relays and their observations would only include their first few purchases. The attrition rate in the full study was 45%, meaning that almost half of those 587 customers never made another purchase following their first order. In both studies, the data demonstrates how important it is to get customers “over the hump” of the first few purchases. After the third purchase for both studies, the probability of customer retention is higher and the price of the average basket goes consistently up. This suggests that customers, once they are experienced and comfortable using Retail Relays, will provide a high value to the company. They would want to then ensure that these customers are included in whatever study they base their analysis on, if they want an accurate metric to predict future patterns of product orders by individuals, the probability that a new customer will remain, and how much they are likely to spend. While the pilot study does have a smaller sample, these participants’ data is