Assignment task: WeBush is a landscaping service that has clients in three segments: 80 small residential, 30 large residential, and 15 businesses. WeBush charges each segment an average monthly rate of $120, $400, and $1000, respectively. The costs to serve each segment on average are: $50, $250, and $380, respectively. The retention rates for the segments are 90%, 70%, and 65% respectively. Assuming an annual discount rate of 5%, calculate the following:
1. CLV for each segment.
2. Suppose the company decides that it would like to invest $20,000 next year on loyalty programs to increase the retention rate. How much would the retention rate need to increase to for each segment if the whole sum were spent in that segment?
3. Instead of spending on retention, let us say they are going to spend the whole sum to acquire 10 more customers in one segment. For each segment, how many customers would they have to acquire to breakeven? (hint: calculate breakeven acquisition rate for each segment and multiply by target size).
4. Imagine that growth rates in contribution are different for each segment. They are 10%, 7%, and 5% respectively. Recalculate CLV for each segment. Which segment looks the most attractive now?