Final answer:
To calculate the customer lifetime value (CLV) of Karmart Inc's Super 356, the given margin of $10 is multiplied by the ratio of the retention rate to the sum of one plus the discount rate minus the retention rate. With a retention rate of 60% and a discount rate of 10%, the CLV is calculated to be $12.
Step-by-step explanation:
The question at hand involves calculating the customer lifetime value (CLV) for a product known as Super 356, produced by Karmart Inc. The customer lifetime value represents the total worth to a business of a customer over the whole period of their relationship. It's an important metric that helps businesses understand the financial value a customer brings and influences marketing strategy, sales, and product development.
For the calculation of CLV, we will be using the formula:
CLV = Margin × (Retention Rate / (1 + Discount Rate - Retention Rate))
Given the margin of $10, a discount rate of 10%, and a retention rate of 60%, let's plug these values into the formula:
CLV = $10 × (0.60 / (1 + 0.10 - 0.60))
CLV = $10 × (0.60 / 0.50)
CLV = $10 × 1.2
CLV = $12
Therefore, the customer lifetime value of Super 356 for Karmart Inc is $12. Understanding this value can help the company in making strategic decisions related to customer relationship management and investing in customer acquisition and retention efforts.