Figure 6.16: Profit Impact of Increased Customer Retention
| CUSTOMER RETENTION |
Percentage limited to 0% to 100%
|
||||
| Performance |
Retained Customers |
Lost Customers |
New Customers |
Total |
|
| Customers | 80,000 | 20,000 | 20,000 | 100,000 | |
| Revenue per Customer | $1,000 | $400 | $600 | $1,000 | |
| Sales Revenues (millions) | $80.0 | $8.0 | $12.0 | $100.0 | |
| Percent Margin | 40% | 40% | 40% | 40% | |
| Gross Profit (millions) | $32.0 | $3.2 | $4.8 | $40.0 | |
| Marketing & Sales per Customer | $75 | $75 | $375 | $150.00 | |
| Marketing & Sales Expenses (millions) | $6.00 | $1.50 | $7.50 | $15.0 | |
| Net Marketing Contributions (millions) | $26.0 | $1.70 | ($2.70) | $25.0 | |
| Marketing ROS | 32.5% | 21.3% | -22.5% | 25.0% | |
| Marketing ROI | 433% | 113% | -36% | 167% | |
| General & Adm. Expenses (millions) | $15 | ||||
| Operating Income (millions) | $10.0 | ||||
| Return on Sales | 10.0% | ||||
| MARKETING ROS | 25.0% | 40% | |||
| MARKETING ROI | 166.7% | 400% | |||
| RETURN ON SALES | 10.0% | 20% | |||
Instruction: Change Customer Retention in the yellow cells to observe how Marketing profitability metrics and Return on Sales changes.