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A Retail Store Sells a Popular Cosmetic Called Devine and the Store

Question 79

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A retail store sells a popular cosmetic called Devine and the store manager was given $100,000 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 17%, and a repurchase frequency of 3 times a year. If these improvement funds could be used to either increase the contribution margin to 0.58 or reduce the customer defection rate to 15% or increase the repurchase frequency to 4 times per year, what is the best way to spend these funds? Assume all other variables remain at the base case level for each improvement option.)
You may want to use the table below to help organize your computations and answer.
 Price  Contribution Marpin  Repwchase Frequency  Defection Rate  VLV in $ $300.50317%$264.69$300.58317% $307.00 $300.50315% $300.00 $500.50417%$352.92\begin{array} { c c c c c } \underline{\text { Price } }& \underline{\text { Contribution Marpin }} & \underline{\text { Repwchase Frequency }} & \underline{\text { Defection Rate }} & \underline{\text { VLV in \$ }} \\ \$ 30 & 0.50 & 3 & 17 \% & \$ 264.69 \\ \$ 30 & 0.58 & 3 & 17 \% & \text { \$307.00 } \\\$30 & 0.50 & 3 & 15 \% & \text { \$300.00 } \\\$ 50 & 0.50 & 4 & 17 \% & \$ 352.92 \\\end{array} Note: BLC is 1/.17 = 5.882 years and 1/.15 = 6.67 years.

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