CLV for Pitcher Filters

Retention rate

80%
Pitcher systems

Unit sales
5266
Revenues
$15.16
Cost of goods sold
$7.80
Gross margin
$7.36
Promotion cost
All in 000'
Consumer promotion
$4,000
Other trade spending
$7,000
Feature price reductions
$5,000
Total promotional cost (a)
$16,000
Advertising cost (b)
$15,000
Total other costs (a+b)
$31,000
Total other cost per unit
$5.89
Unit margin on pitcher scale
$1.47
Assumption
Provided each customer buys 2.5 filter per year and
retention rate is 80%

(per unit)
(per unit)
(per unit)

(per unit)

So, each customer buys 0.8*2.5= 2 filters per year

Filters
Unit sales
27413
Revenues
$4.10 (per unit)
Cost of goods sold
$2.05 (per unit)
Gross margin for 2 filters
$2.05 (per unit)
Gross margin for 2 filters
$4.10
Promotion cost
All in 000'
Consumer promotion
$1,000
Feature price reductions
$1,000
Other trade spending
$1,000
Total promotional cost
$3,000
Advertising cost
$15,000
Total other costs
$18,000
Total other cost per unit
$0.66
Total other cost for 2 filters
$1.31
Margin on 2 pitcher scale filters
$2.79
PV of pitcher filter sales for 5 years
Net cash flow from one customer
Cost of capital
NPV of the cash flows from the customer
Add pitcher acquisition margin
CLV of pitcher customer

Year1

Year2
$2.79
15%
$9.34
$1.47
$10.81

Year3
Year4
Year5
$2.79
$2.79
$2.79
$2.79

CLV for Faucer mount Filters

Customer Acquisition
Unit sales (in 000')
350
Revenues
$27.29
Cost of goods sold
$15.00
Gross margin
$12.29
Promotion cost (d)
$7,000
Advertising cost (f)
$5,000
Total other costs (d+f)
$12,000
Total other costs per unit
$34.29
Unit margin on faucet mount
-$22.00
Assumption
Provided each customer buys 1.25 filter per year and
retention rate is 80%
So, each customer buys 0.8*1.25= 1 filter per year
Contribution
Contribution from retention
$3.00
No promotion/ Advertising
0
Margin on 1 faucet mount filters
$3.00

PV of faucet mount filter sales for 5 years

Net cash flow from one customer
Cost of capital
NPV of the cash flows from the customer
Add faucet mounted acquisition margin
CLV of faucet mounted customer

Year1
$3.00
15%
$10.06
-$22.00
-$11.94

(per unit)
(per unit)
(per unit)
( in 000')
( in 000')
( in 000')
(per unit)

Year2

Year3
Year4
Year5
$3.00
$3.00
$3.00
$3.00