profit shares in a retail channel are often negotiated on a case-by-case basis. Is a 50% profit share enough for the CLV per customer in the retail channel to match the subscription CLV for Dollar Shave Club?
· What would be the minimum profit share to match the CLV of the subscription model?
· The proposed change in distribution moves DSC from a subscription-based, direct, eCommerce channel to a transaction-based, indirect, brick-and-mortar channel. What are THREE important benefits and THREE important drawbacks of this change? Explain your answers
Use Info below to Solve
Please use the retention-based formula for customer lifetime value Clv=(P-C)*q*r/1+i-r-AC
Info for current customer Monthly revenue per customer P=8 Monthly cost=4.50 Monthly purchase per year Q=12 Yearly retention R =83%
Join Us referrals p=8 c=4.50 Monthly purchases per year Q=12 R rate =84%
Orginal referral P=8 Monthly cost c=4.50 Monthly purchases per year Q=12 R rate =80$
· (Q2.1)How much value would DSC gain from each of the two referral types described above? Based on the expected proportion of each type, how much value should DSC expect any given referral to create for them on average?
· (Q2.2) DSC’s current promotional activities require $60 of spending to acquire a new subscriber. Would spending $60 per referral be more or less profitable (in terms of total CLV created) than DSC’s current promotions? What would be the maximum amount of spending per referral to match the value of other promotional spending?
· (Q2.3)Strengthening DSC’s relationships with current customers could provide many potential benefits aside from a change in retention rates. Identify and explain THREE other benefits DSC might gain from strengthening these relationships.
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