A retail store sells a popular cosmetic called Krypton, and the store manager is given $300,000 by the corporate office to improve store performance any way she thinks best. The "base case" information is a price of $30 per bottle, a contribution margin of 0.50, a customer defection rate of 20%, and a repurchase frequency of 4 times a year. If these improvement funds could be used to either (a) increase the contribution margin to 0.60 or (b) reduce the customer defection rate to 15% or (c) increase the repurchase frequency to 5 times per year, please answer the questions listed below. (Assume all other variables remain at the base case level for each of the three improvement options.)
a.What is the value of a loyal customer (VLC) for improvement option (a)?
b.What is the best way to use the $300,000 in improvement funds?

Question

Quizplus · Accepted Answer

The Answer of A retail store sells a popular cosmetic called Krypton, and the store manager is given $300,000 by the corporate office to improve store performance any way she thinks best. The "base case" information is a price of $30 per bottle, a contribution margin of 0.50, a customer defection rate of 20%, and a repurchase frequency of 4 times a year. If these improvement funds could be used to either (a) increase the contribution margin to 0.60 or (b) reduce the customer defection rate to 15% or (c) increase the repurchase frequency to 5 times per year, please answer the questions listed below. (Assume all other variables remain at the base case level for each of the three improvement options.)
a.What is the value of a loyal customer (VLC) for improvement option (a)?
b.What is the best way to use the $300,000 in improvement funds?

A Retail Store Sells a Popular Cosmetic Called Krypton, and the Store