Imagine you started your own taxi business in Toronto. The average customer takes approximately 3 rides and spends $70 a month. For each ride, 50% of the fare goes to the driver, and $2 goes to the administrative and maintenance costs. Assuming 36% of riders find alternative travel arrangements and don’t use the taxi company the following year and the discount rate is 3% per year. What is the CLV?
The answer is $865.54
Can you show me how to get that answer please
CLV margin is the difference between the revenue you receive from a customer and all of the costs associated with that customer in a given timeframe. To get CLV, it is then multiplied by your retention rate and divided by one plus your average discount rate minus your retention rate.
Timespan; since 36% find alternative means then in a year "=0.64*12"
Time Span "=7.68"
Then the retention should be "=1-0.39 = 0.61"
Therefore the CLV should be;