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

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

3. Net Promoter Score

6. Profit

7. Profit
Sales or revenue
Revenue-costs= Profit

8. Referrals, Prospects, Leads and Conversions

10. 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

11. Retention

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

13. Average lifetime value (Customer Lifetime Value)

14. Customer Lifetime Value formula
Basic formula

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

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

17. 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)

18. 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)

19. 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)

20. 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)

21. Gross Profit Margin and Markup

22. Margin and Markup

23. Cost Per Acquisition

26. Thank You
Q&A