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# studyguide_s - Customer Lifetime Value Example Assumptions...

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Customer Lifetime Value Example Assumptions Cost of Mailing = \$.50 Response rate from random mailing = 1% Response rate from targeted mailing = 4% Names may be rented for targeted mailing for \$.20 Random Mailing Targeted Mailing Practice Problems 1) What is the cost of acquisition if the cost of a mailing is \$3 and the response rate is 4%? 2) What is the cost of acquisition of a targeted mailing if the firm can rent names for a targeted mailing for \$.50 per name and the response rate grows to 8%?

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Assuming the acquisition costs above (not from the practice problems) Assume that two types of customers exist Type 1 purchases 2 times a year with an average order size of \$50 Retention rate of 75% Type 2 purchases once a year with an average order size of \$80 Retention rate of 50% Gross Margins of 20% 12 catalogs sent to all customers the first year Based upon 1 st year purchasing frequent buyers continue to receive 12 catalogs while
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studyguide_s - Customer Lifetime Value Example Assumptions...

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