scm 304 vlc

13
VALUE OF A LOYAL CUSTOMER Luis Sicairos, Acela Gudino, Andrea Lopez, Amanda Sabbah, Denise Arias

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Page 1: SCM 304 VLC

VALUE OF A LOYAL

CUSTOMER

Luis Sicairos, Acela Gudino, Andrea Lopez,

Amanda Sabbah, Denise Arias

Page 2: SCM 304 VLC

Definition

⦿ VLC quantifies the total revenue or profit

each target market customer generates

over the buyers life cycle

Page 3: SCM 304 VLC

VLC= (P)(CM)(RF)(BLC)

⦿P= revenue per unit

⦿CM= contribution margin to profit and

overhead- expressed as a fraction

⦿RF= repurchase frequency- the number

of purchases per year

⦿BLC= buyers life cycle

Page 4: SCM 304 VLC

Importance

⦿ By multiplying the VLC times the

absolute number of customers gained or

lost, the total number market value can

be found.

Page 5: SCM 304 VLC

Quantifying VLC at Sam’s Club

⦿ žMemberships

● $45 Savings/Business or $100 Plus

⦿ Retention rate of 89.3% at Club #6610

⦿ Benefits for Members

● —Instant Savings Book that comes out every

other month

● Cash Back Rewards Program for Plus

Members

Page 6: SCM 304 VLC

VLC for Sam’s Club

⦿ If the customer retention rate for Sam’s

Club is 89.3% than the average

customer defection rate is 0.107 or

10.7%. The average buyers life cycle is

1/0.107= 9.35 years.

⦿VLC= ($100 membership)(0.935 years)

($100)(1/0.107)

⦿VLC= $87,383.18 over the buyers life

cycle*Membership is Pure Profit

Page 7: SCM 304 VLC

Quantifying VLC at Costco

⦿ žMembership

● —$55 for Gold/Business $110 for Executive

⦿ žRetention Rate 2013 89.7% increased

to 89.9% YTD

⦿ žBenefits

● —Coupon Book

● —Cash Rewards for Executive Membership

Page 8: SCM 304 VLC

VLC for Costco

⦿ If the customer retention rate for Costco

is 89.9% than the average customer

defection rate is 0.101 or 10.1%. The

average buyers life cycle is 1/0.101=

9.90 years.

⦿VLC= ($110 membership)(0.990 years)

($110)(1/0.101)

⦿VLC= $118,603.96 over the buyers life

cycle*Membership is Pure Profit

Page 9: SCM 304 VLC

ULTA Beauty Salon

Page 10: SCM 304 VLC

Café Rio

Page 11: SCM 304 VLC

Sonora Tires

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Skechers

Page 13: SCM 304 VLC

European Wax Center