Question

Estimate the value of a loyal customer of a loyal Volvo automobile owner. Assume the contribution margin is 0.28, the purchase price is $63,000, the repurchase frequency is every six years, and the customer defection rate is 22 percent. Do not round intermediate calculations. Round your answer to the nearest dollar.

Answer 1

The value of a loyal Volvo automobile owner is calculated using the purchase price, the contribution margin, the repurchase frequency, and the customer defection rate to estimate the customer's lifetime value.

Step-by-step explanation:

To estimate the value of a loyal Volvo automobile owner, it's necessary to calculate the lifetime value considering the provided variables. This includes the purchase price of the car, the contribution margin, the repurchase frequency, and the customer defection rate. Using the given numbers, this calculation would be done typically through a formula that takes into account the net profit from each purchase and the expected number of repeat purchases over the customer's lifetime, adjusted for the likelihood of customer defection.