Problem:
Joe, the owner manager of Joe's Barbeque, has recently become acquainted with the concept of Value of a Loyal Customer (VLC). He had always rather intuitively thought that his "regulars" were the ones that were most valuable to his business. Now he is not as sure. As he pondered this, he noticed one of his regulars getting his regular meal, a $9.50 sandwich plate. He remembered that this guy came in at least once and often about twice a week at lunch and almost always got the same thing. So, he figured that this customer typically spent $ 9.50 per visit and probably came in about 96 times per year. He then considered a family that came in two or three times per month or an estimate of 29 times per year and consistently spent about $ 32 per visit. His contribution margin is about 19% and he figures he loses about 20% of his customers.
Required:
Question 1) Which of these two customers is more valuable with respect to the value of loyal customer calculation?
Solve the given numerical problem and illustrate step by step calculation.