Few companies take the time to estimate the value of a good customer and often spend little effort to keep one Suppose that a

Question

Few companies take the time to estimate the value of a good customer and often spend little effort to keep one Suppose that a customer at a restaurant spends on average R per visit and comes F times each 1 year for example if a customer purchases once every two years then F 0 5 The restaurant realizes a gross profit margin of M expressed as a fraction on the average bill for food and drinks In addition the fraction of customers defecting not returning each year is D Complete parts a and b 2 a Develop a mathematical model to compute V the gross profit during a customer s lifetime in doing business with the restaurant this is often called the economic value of a customer RFM D Simplify your answer b If the average purchase per visit is 40 the gross profit margin is 0 4 that is 40 customers visit an average of six times each year and 30 of customers defect each year what is the economic value of the customer V The economic value of the customer is Round to the nearest dollar as needed

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