Question

A local dental practice decides to run a Groupon campaign. The campaign offered $345 worth of...

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 (+/-).

Homework Answers

Answer #1

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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