Contemporary Selling Sales Math Dr. Carlos Valdez Integrated Business Program College of Business Administration University of Central Florida

Sales Math Net Promoter Score Profit Leads and Conversions Retention (Churn rate) Customer Lifetime Value Gross Profit Margin and Markup Cost per Acquisition

Net Promoter Score

Profit

Profit Sales or revenue Revenue-costs= Profit

Referrals, Prospects, Leads and Conversions

How many leads do we need? For a revenue goal of $214,500 Average sale price $13,000 x 10% conversion rate=$1,300 Revenue goal $214,500/$1,300 = 165 leads

Retention

Retention Churn rate= percentage of existing customers who stop purchasing your product, often measured in a year.

Average lifetime value (Customer Lifetime Value)

Customer Lifetime Value formula Basic formula

STEP 1: Define actions to bring new customers and calculate the cost of those actions per customer Harvard Business School (2011)

STEP 2: Calculate the annual profits the customer generates to the firm (revenue-variable cost) Harvard Business School (2011)

The number of years the customer is likely to purchase from the firm STEP 3: The number of years the customer is likely to purchase from the firm Harvard Business School (2011)

Basic Customer Lifetime Value Formula CLV = m * L – AC m= contribution margin generated from a customer in a year L= expected purchasing life of a customer AC= up-front cost of acquiring a customer Best customers Are less expensive to acquire Generate more profit to the firm Choose to be customers for a longer period of time Harvard Business School (2011)

Basic Customer Lifetime Value Formula CLV = m * L – AC m= contribution margin generated from a customer in a year L= expected purchasing life of a customer AC= up-front cost of acquiring a customer Example The restaurant spends $25 to attract a new customer The restaurant will generate $150 of profit each year per customer The average customers stays for 4 years What is the CLV= ? Harvard Business School (2011)

Basic Customer Lifetime Value Formula CLV = m * L – AC m= contribution margin generated from a customer in a year L= expected purchasing life of a customer AC= up-front cost of acquiring a customer Example The restaurant spends $25 to attract a new customer The restaurant will generate $150 of profit each year per customer The average customers stays for 4 years What is the CLV= ? $150 * 4 - $25 = $575 Harvard Business School (2011)

Gross Profit Margin and Markup

Margin and Markup

Cost Per Acquisition

Thank You Q&A