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Post on 01-Jul-2015
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VALUE OF A LOYAL
CUSTOMER
Luis Sicairos, Acela Gudino, Andrea Lopez,
Amanda Sabbah, Denise Arias
Definition
⦿ VLC quantifies the total revenue or profit
each target market customer generates
over the buyers life cycle
VLC= (P)(CM)(RF)(BLC)
⦿P= revenue per unit
⦿CM= contribution margin to profit and
overhead- expressed as a fraction
⦿RF= repurchase frequency- the number
of purchases per year
⦿BLC= buyers life cycle
Importance
⦿ By multiplying the VLC times the
absolute number of customers gained or
lost, the total number market value can
be found.
Quantifying VLC at Sam’s Club
⦿ žMemberships
● $45 Savings/Business or $100 Plus
⦿ Retention rate of 89.3% at Club #6610
⦿ Benefits for Members
● —Instant Savings Book that comes out every
other month
● Cash Back Rewards Program for Plus
Members
VLC for Sam’s Club
⦿ If the customer retention rate for Sam’s
Club is 89.3% than the average
customer defection rate is 0.107 or
10.7%. The average buyers life cycle is
1/0.107= 9.35 years.
⦿VLC= ($100 membership)(0.935 years)
($100)(1/0.107)
⦿VLC= $87,383.18 over the buyers life
cycle*Membership is Pure Profit
Quantifying VLC at Costco
⦿ žMembership
● —$55 for Gold/Business $110 for Executive
⦿ žRetention Rate 2013 89.7% increased
to 89.9% YTD
⦿ žBenefits
● —Coupon Book
● —Cash Rewards for Executive Membership
VLC for Costco
⦿ If the customer retention rate for Costco
is 89.9% than the average customer
defection rate is 0.101 or 10.1%. The
average buyers life cycle is 1/0.101=
9.90 years.
⦿VLC= ($110 membership)(0.990 years)
($110)(1/0.101)
⦿VLC= $118,603.96 over the buyers life
cycle*Membership is Pure Profit
ULTA Beauty Salon
Café Rio
Sonora Tires
Skechers
European Wax Center
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