A local dental practice decides to run a Groupon campaign. The campaign offered $360 worth of dental services (such as teeth whitening) for $145. For the total campaign, 225 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 60%. Finally, the bill for the average Groupon customer was $385. The dental practice negotiated a 50/50 split with Groupon. Calculate the revenue from the Groupon campaign.
Total Coupons redeemed = 255*85% = 216.75
As each cutomer purchased 1.5 coupons, Total Customers = 216.75/1.5
= 144.5
= 145 customers (Approx)
New customers = (1-35%) *145
= 94.25
= 94 customers (Aprrox)
Cost of Dental services = $146*216.75
= $31,645.50
= $31,646 (Approx)
Other Costs (COGS) = 145 * $385 *60%
=$33,495 (approx)
But it is shared with Groupon,
Hence net Cost = $33,495*50% =$16,748
Total Cost = dental Cost + other cost = $31,646 +$16,748
=$48,393
Revenue from Customers = 145*$385
=$55,825
Profit = Revenue - Cost
=$55,825 -$48,393
=$7,431
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