A local dental practice decides to run a Groupon campaign. The campaign offered $345 worth of dental services (such as teeth whitening) for $135. For the total campaign, 250 coupons were sold. We estimate that 85% of the coupons will be redeemed, that 35% of the coupons will be redeemed by existing customers and that, on average, Groupon customers purchased 1.5 coupons. Let’s assume that 29% of new customers come back after the Groupon coupon visit. The dental practice estimates its cost of goods sold to be 55%. Finally, the bill for the average Groupon customer was $385. The dental practice negotiated a 50/50 split with Groupon.
Calculate the breakeven revenue for a new Groupon customer.
Solution:
Given data follows Below:
The campaign offered = $345
Dental services (such as teeth whitening) for = $135.
Coupons were sold = , 250
Total coupons redeem = 250 x 85% = 212.5
Estimate that of the coupons = 85%
Redeemed, that = 35%
Group on customers purchased =1.5 coupons.
The average Groupon customer was =$385
Estimates its cost of goods sold to be =55%
As each customer purchased 1.5 coupons, total customers
= 212.5/1.5
= 142 customers
New customers
= (1 - 35%) x 142
= 92
Cost of dental services
= 135x 212.5
= 28,688
Other costs
= 142 x 385x 55%
= 30,069
But it is to be shared 50% with Groupon, hence, net cost
= 15,035
Total cost
= 30,069+ 15,035
= 45,104
or senario 2
Cost per new customer
= 45,104 / 92
= 490.
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