3. Life Time Value Incremental Customer Need to know the following a.Gross profit of an average purchase b.Average Number of purchases a customer makes each year c.Average number of years customer will continue to purchase d.Probability customer will continue to purchase Formula: LVIC = a+ (a*b*c*d)

4. Word of Mouth: Incremental Customer Need to know the following a.Likelihood that customer will refer b.Number of people to whom the recommendation will be made c.Percent of referrals that are empathetic (i.e., have the ability to act on what they hear) d.Probability of those who are empathetic who will buy the service e.LVIC Formula: WOM = (a*b*c*d*e)

5. Word of Mouth: All Customers Need to know the following a.Total number of customers that can spread WOM b.Likelihood that customer will refer (AKA % of satisfied customers) c.Number of people to whom the recommendation will be made d.Percent of referrals that are empathetic (i.e., have the ability to act on what they hear) e.Probability of those who are empathetic who will buy the service f.LVIC Formula: WOM = (a*b*c*d*e*f)

6. Negative Word of Mouth: Incremental Customer Need to know the following a.Number of people dissatisfied customers tells ___ people b.Percent of people that are empathetic (i.e., have the ability to act on what they hear) c.LVIC Formula (a*b*c)

9. Life Time Value Incremental Customer Jellystone Resort Campground Know the following from page 8 of case –Sale price –Fixed cost –Variable cost –Average stay –Customers come for about –Return customers –Total customers

10. Life Time Value Incremental Customer Jellystone Resort Campground Know the following from page 8 of case –Sale price $35 –Fixed cost $3 –Variable cost $12 –Average stay 2.5 days –Customers come for about 12 years –Return customers 3,500 –Total customers 8,000

11. Life Time Value Incremental Customer Jellystone Resort Campground Calculate the following: a.Gross profit of an average purchase: b.Average number of purchases per year by customer: c.Average number of years customer will continue to purchase: d.Probability customer will continue to purchase: Formula: LVIC = a + (a*b*c*d)

12. Life Time Value Incremental Customer Jellystone Resort Campground Calculate the following: a.Gross profit of an average purchase: $35 - $12 = $23/day b.Average number of purchases per year by customer: 2.5 purchases c.Average number of years customer will continue to purchase:12 d.Probability customer will continue to purchase: 3,500/8,000=.437 Formula: LVIC = a + (a*b*c*d)= (23*2.5)+ 301.53=359.03

13. Word of Mouth: Incremental Customer Need to know the following a.Likelihood that customer will refer b.Number of people to whom the recommendation will be made c.Percent of referrals that are empathetic (i.e., have the ability to act on what they hear) d.Probability of those who are empathetic who will buy the service e.LVIC Formula: WOM = (a*b*c*d*e)

14. Word of Mouth: Incremental Customer Need to know the following a.Likelihood that customer will refer 8 out of 10 satisfied b.Number of people to whom the recommendation will be made 3 c.Percent of referrals that are empathetic (i.e., have the ability to act on what they hear) 2/3 or.667 d.Probability of those who are empathetic who will buy the service 14% e.LVIC=359.03 Formula: WOM = (a*b*c*d*e)= $80.46 (note, if ignore A then value is $100.58)

15. Word of Mouth: Incremental Customer: future customers Need to know the following a.Number of customers that can spread the word b.Percent of satisfied customers c.Number of recommendations per satisfied customer d.Percent of referrals that are empathetic (i.e., have the ability to act on what they hear) e.Probability of those who are empathetic who will buy the service f.LVIC Formula: WOM = (a*b*c*d*e*f)

16. Word of Mouth: Incremental Customer: future customers Need to know the following a.Number of customers that can spread the word 24,000 customers (8,000 per year *3 members per family b.Percent of satisfied customers.80 (8 of ten satisfied) c.Number of recommendations per satisfied customer 3 d.Percent of referrals that are empathetic (i.e., have the ability to act on what they hear).667 (2 of 3) e.Probability of those who are empathetic who will buy the service.14 f.LVIC $359.03 Formula: WOM = (a*b*c*d*e*f)=$1,931,110

17. Negative Word of Mouth: Incremental Customer Need to know the following a.Number of people dissatisfied customers tells b.Percent of people that are empathetic (i.e., have the ability to act on what they hear) c.LVIC Formula (a*b*c) = $

18. Negative Word of Mouth: Incremental Customer Need to know the following a.Number of people dissatisfied customers tells 10 people (page 7 of case) b.Percent of people that are empathetic (i.e., have the ability to act on what they hear).667 c.LVIC=$359.03 Formula (a*b*c) =$2,394.73

19. Impact of Promotion to Increase Word of Mouth: Jellystone Resort Campground What we know: –Mailed 1000 postcards –10% off a 2 night stay and same discount for friends they brought with them –Need to bring post card with you to get discount –200 people returned with card –50 came with card that was passed on to them by original receiver What is value of this promotion?

20. Impact of Promotion to Increase Word of Mouth: Jellystone Resort Campground What we need to know: a.# of redemptions b.Revenue per customer per day c.Discount d.Length of stay e.Number of new comers f.New customer revenue g.Life time value of new comers h.What program cost loss revenue = 250 * $35* 2 = $17,500 (no discount) 250 *$31.50*2 = $15,750 (discount) difference: $1, 750 + cost of mailing

21. Impact of Promotion to Increase Word of Mouth: Jellystone Resort Campground What we need to know (from page 8&9) a.# of redemptions 250 b.Revenue per customer per day $35 c.Discount 10% d.Length of stay 2 e.Number of new comers 50 f.New customer revenue 50*$35 (rate)*.90 (discount of 10%)*2(night stay) = $3,150 g.Life time value of new customers = 50*$23*2.5=$2,875 = value first visit + 50*.437*23*2.5*12=$17,952 Recall, cost of program was $1,750