CLV for Pitcher Filters

Retention rate 80%

Pitcher systems
Unit sales 5266
Revenues $15.16 (per unit)
Cost of goods sold $7.80 (per unit)
Gross margin $7.36 (per unit)
Promotion cost All in 000'
Consumer promotion $4,000
Other trade spending $7,000
Feature price reductions $5,000
Total promotional cost (a) $16,000
Advertising cost (b) $15,000
Total other costs (a+b) $31,000
Total other cost per unit $5.89 (per unit)
Unit margin on pitcher scale $1.47
Assumption
Provided each customer buys 2.5 filter per year and
retention rate is 80%
So, each customer buys 0.8*2.5= 2 filters per year
Filters
Unit sales 27413
Revenues $4.10 (per unit)
Cost of goods sold $2.05 (per unit)
Gross margin for 2 filters $2.05 (per unit)
Gross margin for 2 filters $4.10
Promotion cost All in 000'
Consumer promotion $1,000
Feature price reductions $1,000
Other trade spending $1,000
Total promotional cost $3,000
Advertising cost $15,000
Total other costs $18,000
Total other cost per unit $0.66
Total other cost for 2 filters $1.31
Margin on 2 pitcher scale filters $2.79

PV of pitcher filter sales for 5 years Year1 Year2 Year3 Year4 Year5
Net cash flow from one customer $2.79 $2.79 $2.79 $2.79 $2.79
Cost of capital 15%
NPV of the cash flows from the customer $9.34
Add pitcher acquisition margin $1.47
CLV of pitcher customer $10.81
 CLV for Faucer mount Filters
Customer Acquisition
Unit sales (in 000') 350
Revenues $27.29 (per unit)
Cost of goods sold $15.00 (per unit)
Gross margin $12.29 (per unit)
Promotion cost (d) $7,000 ( in 000')
Advertising cost (f) $5,000 ( in 000')
Total other costs (d+f) $12,000 ( in 000')
Total other costs per unit $34.29 (per unit)
Unit margin on faucet mount -$22.00
Assumption
Provided each customer buys 1.25 filter per year and
retention rate is 80%
So, each customer buys 0.8*1.25= 1 filter per year
Contribution
Contribution from retention $3.00
No promotion/ Advertising 0
Margin on 1 faucet mount filters $3.00

PV of faucet mount filter sales for 5 years Year1 Year2 Year3 Year4 Year5
Net cash flow from one customer $3.00 $3.00 $3.00 $3.00 $3.00
Cost of capital 15%
NPV of the cash flows from the customer $10.06
Add faucet mounted acquisition margin -$22.00
CLV of faucet mounted customer -$11.94