The company is regional electrical distributor

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The company is a regional electrical distributor. It currently has 1,000 customers who buy an average of $5,000 per year, generating a 50% margin. From experience, the company knows that 20% of its customers will not return the next year and that it spends an average of $500 to acquire each new customer. Given a choice of investing an additional $50,000 what shtoula the comptony aro7 retention program what should the company do? Assume: $50,000 spent on retention reduced churn from the present rate of 20% to 15% and $50,000 spent on acquisition resulted in 100 new customers in year 1 Restrict your analysis to a five year period FIVE YEAR PAYOUT

Scenario 1: New Customer Acquisition Year 1 100 Year 2Year 3 Year 4Year 5 Incremental Customers: Purchases: Annual Profits Cumulative Profits:

Scenario 2: Customer Retention Year 1Year 2 Year 3 Year4 Year 5 Retained Customers @ 20%; 800 Retained Customers @ 15%: Additional Retained Customers: Incremental Annual Purchases: Annual Profits Cumulative Profits:

Reference no: EM132301422

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