Answer:
Cool Beans
The CLV of a customer over the time horizon of one year prior to the introduction of the loyalty program is:
= $353.60
Step-by-step explanation:
a) Data and Calculations:
Price of average specialty coffee drink = $3.40
Profit Margin = 65%
Profit Margin = $2.21 ($3.40 * 65%) per drink
Average drinks per customer per week = 2
Total drinks in a year = 104 (2 * 52)
Profit Margin in a year = $229.84 ($2.21 * 104)
Therefore, the Customer Lifetime Value = Gross Revenue
= $3.40 * 2 * 52 = $353.60
b) The Customer Lifetime Value (CLV) is the average purchase value multiplied by the average purchase frequency rate. In this customer's case, the CLV is calculated for only one year and not actually for a lifetime.