A local dental practice decides to run a Groupon campaign. The campaign offered $345 worth of dental services (such as teeth whitening) for $150. For the total campaign, 265 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 22% 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 $395. The dental practice negotiated a 50/50 split with Groupon.
Calculate the Groupon campaign profit/loss (+/-).
Solution:
Given data follows Below:
The campaign offered = $345,
Dental services (such as teeth whitening) for = $150.
Coupons were sold = 265
Total coupons redeem = 265 x 85% = 225.25
Estimate that of the coupons = 85%
Redeemed, that = 35%
Group on customers purchased =1.5 coupons.
The average Groupon customer was =$395,
Estimates its cost of goods sold to be =60%,
As each customer purchased 1.5 coupons, total customers
= 225.25/1.5
= 150 Customers
New customers
= (1 - 35%) x 150
= 97.5
=98
Cost of dental services
= 150*225.25
= 33,787.5
=33,788.
Other costs:
= 150 x 395x 60%,
= 35,550,
But it is to be shared 50% with Groupon, hence, net cost
= 17,775,
Total cost
= 35,550 + 17,775
= 53,325
or senario 2
Cost per new customer
= 53,325 / 98
= 544.
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