Question

Q1)

A specialty fabric manufacturer plans to spend $120,000 on an advertisement reaching 90,000 readers. If the company expects the advertisement to convince 2% of the readers to take advantage of a special introductory offer and the CLV of the acquired customers is $200.

What is the Break-Even Acquisition Rate?

Q2)

A catalog retailer has grouped customers in 10 deciles based on profitability. (A decile is a tenth of the population, so 0-10% is the most profitable 10% of customers.)

	Cumulative Profits $	Cumulative Profits %
Customer Decile:   0 - 10%	$     400.00	30.8%
Customer Decile:   10 - 20%	$     750.00	57.7%
Customer Decile:   20 - 30%	$ 1,075.00	82.7%
Customer Decile:   30 - 40%	$ 1,375.00	105.8%
Customer Decile:   40 - 50%	$ 1,575.00	121.2%
Customer Decile:   50 - 60%	$ 1,725.00	132.7%
Customer Decile:   60 - 70%	$ 1,825.00	140.4%
Customer Decile:   70 - 80%	$ 1,775.00	136.5%
Customer Decile:   80 - 90%	$ 1,650.00	126.9%
Customer Decile:   90 - 100%	$ 1,300.00	100.0%

If they were no longer served the least profitable 30% of customers, they would be $28 million better off.

How much would their income improve?

Answer 1