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Intro

Exam 3 consists of six sections- be sure that you have gone through the tabs for all six sections and answered all questions before uploading your exam. Collaborating with other students is not permitted. Evidence of collaboration will result in an exam grade of 0 for all students involved. Deadline for submitting this exam in the appropriate Dropbox folder on D2L is shown in the syllabus. If you have any questions about the exam, please contact me. I will give guidance as I can while still leaving the task of answering exam questions to you.

MKT 3825 EXAM 3

Section 1

1. A large state university wants to calculate their retention rate for undergraduate students. A total of 14,513 undergraduates were eligible to re-enroll. a. If 11,556 of those students returned to the university as undergraduate students, what is the university’s retention rate? (3 points) b. What is the university’s churn rate? (3 points)

2. In February, department store retailer Belk held an Engagement Party in the stores’ home department and invited couples engaged to be married. The purpose of the party was to acquire new customers. The Engagement Party featured displays of gift registry merchandise, refreshments, giveaways, and drawings for prizes from Belk. Registry specialists were also available during the party to assist engaged couples with wedding registry selections. Belk spent a total of $5,000,000 across all stores on these engagement parties. If 53,000 new wedding registries were created, what is the acquisition cost per couple? (5 points)

3. A local lawn care company distributed direct mail pieces (i.e., promotional fliers mailed to households via traditional mail) to acquire new household customers. The cost of each direct mail message (for postage, printing, mailing list) was $8.50. If 10% of households responded to the message and became new customers, what is the acquisition cost per household? (5 points.)

Section 2 Catalog Customers

Mignon Faget® is a New Orleans artist and jewelry designer. She operates a catalog business, an online store, and five brick-and-mortar stores in south Louisiana. Her jewelry is also sold by select retailers in the southeast United States.   Mignon Faget asks the head of her accounting department for some information needed to compute customer lifetime value (CLV) for her catalog customers and her online customers. The head accountant responds with the following information:   Catalog Customers 15,000 new catalog customers were acquired in the acquisition year The average customer retention rate is 40% The cost of acquiring a new catalog customer (in the acquisition year) is $175 Once the customer is acquired, the average length of the catalog customer relationship is four years The average catalog customer spends $300 per purchase The average catalog customer only buys from the catalog once a year Cost of sales is 55% The cost of mailing out catalogs (after the acquisition year) is $57.00 per customer The current interest rate is 4% 4. Calculate Customer Lifetime Value for catalog customers below (you will need to construct the analysis in space below using the 10-step process described the PowerPoints. Using the Review Worksheet can also be helpful). CLV must be calculated on a per-customer basis for the entire relationship. This problem must be computed using MS Excel. (9 points)

Section 2 Online Customers

Mignon Faget asks the head of her accounting department for some information needed to compute customer lifetime value (CLV) for her catalog customers and her online customers. The head accountant responds with the following information:   Online Customers 17,500 new online customers were acquired in the acquisition year The average customer retention rate is 65% The cost of acquiring a new online customer (in the acquisition year) is $75 The average length of the online customer relationship is six years The average online customer spends $125 per purchase The average online customer buys from the online store three times a year Cost of sales is 55% The cost of retaining online customers (after the acquisition year) is $30 per customer The interest rate is 4% 5. Calculate Customer Lifetime Value for online customers below (you will need to construct the analysis in space below using the 10-step process outlined in the PowerPoint and practiced in the Review Assignment). CLV must be calculated on a per-customer basis for the entire relationship. This problem must be computed using MS Excel. (9 points)

Section 2 Recommendations

6. Based on your CLV calculations, which group of customers should be the priority for Mignon Faget® in terms of developing relationships? Explain your answer; support with objective evidence (e.g., CLV : Acquisition Cost ratio). (4 points)

ANSWER:

7. Based on your CLV calculations, what should Mignon Faget® do to increase profitability of the group with lower CLV? (4 points) HINT: Recommendation should relate to one or more inputs of CLV.

ANSWER:

Section 3

Table 1 contains information on price, quantity sold, and distribution for three men’s luxury watch brands.

8. Calculate price premium (%) for the Rolex men’s watch, using the price of the Breitling watch as a benchmark. (5 points).

9. Calculate price premium (%) for the Rolex men’s watch, using a unit share weighted average price (average price paid) for the three brands as a benchmark. (5 points).

10. Calculate price premium (%) for the Rolex men’s watch using the simple (unweighted) average of the three brands in Table 1 as a benchmark. (5 points).

Section 4

A new coffee shop is slated to open on campus. Table 2 contains information on different prices and the number of cups of coffee demanded at each price. Figure 1 contains a graph of the demand function based on the information provided in the table.

Figure 1: Demand Function for Coffee

11. Using information from the demand function above, what is the Maximum Reservation Price (or MRP) for coffee? (4 points)

12. What is the optimal price for coffee based on the demand function presented in Table 2 and Figure 1? (4 points) HINT: Use optimal price formula.

13. Calculate elasticity of demand using the optimal price in Q12. (4 points)

14. Describe elasticity of demand for coffee at the optimal price you calculated in Q13 (highly elastic? moderately elastic? something else?) and how elasticity will affect decisions about pricing the product. (4 points)

ANSWER:

Section 5

Hubspot tested two different landing pages on its website to increase sign-ups to its email list. Landing Page A offered visitors an infographic download about online marketing trends for 2018. Landing Page B offered visitors a free ebook about online marketing trends for 2018. The two landing pages were tested for two weeks. Results of the test were as follows: Landing Page A - Pageviews = 30,000 - Downloads = 1,567 Landing Page B - Pageviews = 27,000 - Downloads = 1,490

15. Using the above information, calculate clickthrough rate for each landing page (2 points each)

16. Which landing page was more effective for getting email list sign-ups? Use metrics calculated as supporting evidence. (3 points)

ANSWER:

Section 6

Foot Cardigan is an online socks website (purchase individually or by monthly subscription). The company ran a Black Friday/Cyber Monday Google AdWords campaign, using search and display ads to promote Foot Cardigan's holiday socks and other gift ideas. A summary of the campaign follows. Search (pay-per-click) ads Display ads - Impressions = 78,000 - Impressions = 112,000 - Ad clicks = 901 - Ad clicks = 855 - Total Ad Cost = $1,115 - Total Ad Cost = $750 - Orders placed = 125 - Orders placed = 78

17. Evaluate effectiveness of search ads for Foot Cardigan by calculating the following performance metrics. (2 points each) - Cost per impression - Cost per click - Cost per order - Conversion rate

18. Evaluate effectiveness of display ads for Foot Cardigan by calculating the following performance metrics. (2 points each) - Cost per impression - Cost per click - Cost per order - Conversion rate

19. Which of the ad formats (search or display) was more effective overall for Foot Cardigan? Give support for your answer using the metrics calculated. (4 points)

ANSWER: