Question

Calculate the customer's lifetime value using the following information: A sales call costs $250. It takes 5 calls to gain a customer. The profit margin is 10%. Average customer revenue is $4,000. Number of years loyal is 3.

A. $125
B. $250
C. $1,200
D. $1,250
E. $2,500

Answer 1

The customer's lifetime value is C. $1,200.

Step-by-step explanation:

The customer's lifetime value can be calculated by multiplying the average customer revenue by the profit margin and the number of years loyal. First, calculate the profit from each customer:

$4,000 (average customer revenue) x 10% (profit margin) = $400

Then, calculate the total profit over the customer's lifetime:

$400 (profit per customer) x 3 (number of years loyal) = $1,200

Therefore, the customer's lifetime value is $1,200.