Alfred's organic dog food was formulated to provide for the nutritional needs of older pets....
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Alfred's organic dog food was formulated to provide for the nutritional needs of older pets. The company did not sell through retailers, but shipped directly to consumers. Consumers ordered through the company's web site or called the 1-800 number. An analysis of the company's records showed the patterns for a typical cohort of 50 customers in the table below. The company's contribution margin on this product was 39% of sales after shipping, order processing and other variable non-marketing costs. Each order included a brochure and reorder forms that cost $0.65 per shipment. Because the time between orders averaged 3 months, the company organized their analysis into period of 3 month duration. Almost no customers ordered after two years from their initial order. Alfred has historically used an annual discount rate of 9% to determine CLV. 3 Month Period 0 1 2 3 4 5 6 Customer Orders 50 20 16 12 8 4 2 Avg $/Order $30 $40 $31 $35 $25 $20 $20 Using the same discount rate, what is the CLV remaining for customers who have placed one initial order, but not yet ordered the second time?
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