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Customer A Customer B

Particulars Number ofAmount


Sales
1 103000 104000
Cost of Items purchased
2 85000 85000
Gross Margin
3 (1-2) 18000 19000
Number of Cartons
4 Ordered 200 10400 200 10400
Number of Cartons
5 Shipped 200 1200 150 900
Number of Desktop
6 Deliveries 0 0 25 5500
Number of Orders Manual
7 6 60 100 1000
Number of Line Items
8 Manual 60 240 180 720
Number of EDI Orders
9 6 30 0 0

11930 18520

6070 480
Average Accounts
10 Recivable 9000 900 30000 3000
11 Profit
Cost/Activity

52

220

10

5
Relationship based costing

No. of customers 115000 Increase retention rate


Revenue per customer 1500 Increase revenue per customer
Gross margin 36.0% Increase no of customers

Gross profit/customer 540 Loss leader - product may be unprofitab

Customer acquisition cost 150 Loyalty bonus - to retain existing custom


(advertising, mailers) - to target non customers
Customer retention cost 130

Retention rate 16.7% Increasing the retention rate


Discount rate 10.0%

Period 0 1 2 3 4 5
Revenue 1500 1500 1500 1500 1500 1500
Gross margin 540 540 540 540 540 540

Customer acquisition cost 150 0 0 0 0 0


Customer retention cost 130 130 130 130 130 130

Retention rate 100% 17% 3% 0% 0% 0%

No. of years customers lasted 1.200005

260 410 410 410 410 410


260.0 68.3 11.4 1.9 0.3 0.1
Discount rate 100% 110% 121% 133% 146% 161%

260.0 62.1 9.4 1.4 0.2 0.0


CLTV 333.216011

Total CLTV 38319841.3


retention rate
revenue per customer Cross selling, up selling Cross selling happens at a discount
no of customers

er - product may be unprofitable, but the CLTV will be positive

onus - to retain existing customers

Survival models - how does the retention rate changes over time
Relation b/w customer retention cost and retention rate

6 7 8 9 10
1500 1500 1500 1500 1500
540 540 540 540 540

0 0 0 0 0
130 130 130 130 130

0% 0% 0% 0% 0%

410 410 410 410 410


0.0 0.0 0.0 0.0 0.0
177% 195% 214% 236% 259%

0.0 0.0 0.0 0.0 0.0