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karmart inc produces a product called super 356. the margin of super 356 is $10. if the discount rate is 10%, and the retention rate is 60%, how much is the customer lifetime value?

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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.

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