Customer Lifetime Value Analysis
due Week 4, Tuesday, 17 SEP, 11:59 (noon)
Pierre Boulanger opened a bakery about a year ago.  While business appears to be reasonably good and now has a loyal following of regular customers, Pierre has been having a problem with some customers who always seem to be trying to get something for free. Pierre fills several specialty orders each week worth hundreds of dollars each in total revenue -- things like wedding cakes or contracts to make desserts for catering businesses. About two thirds of his revenues, however, come from products that are priced by the dozen (e.g., donuts) and sold at the front counter in his shop to final household consumers. Unfortunately, some customers repeately demand a thirteenth item ("baker's dozen") in these sales. Pierre tries to explain that he maintains low margins to keep his prices down, but these same customers keep complaining anyhow. Even worse are customers who demand a free sample before they make a purchase decision, somethings going through two or three samples before making a decision as to what to buy in the purchase of a dozen donuts.
Pierre doesn't know what to do. He believes that some of these customers are "jay customers" who are simply taking advangage of him and trying to get something for nothing. Pierre's initial thoughts have been to "fire" these customers because they are literally eating into his profits; he is thinking that they are not worth his trouble and he would be better off without them. However, Pierre recently read an article about Customer Lifetime Value Analysis and wonders if perhaps it would be more profitable to simply smile and otherwise keep his mouth shut whenever he encounters these customers.
Pierre knows that you are a business student. He has asked for your advice. Write a professional memo that gives him an analysis ending with a decisive answer regarding how he should be treating what he believes are "jay customers". Your analysis MUST assess issues of the lifetime value of a customer in THIS situation.
Your memo of about a page in length must be structured in the following format, not necessarily with any sort of headings:
Note that "memo," is used here to mean a brief report; don't include "to" and "from" lines and such. (Your name IS required to be at the top of your submission; you will be penalized by two letter grades for not doing so.) Appropriate length of the report body is about one single-spaced page. It is not appropriate to include a cover page with a professional business memo. All calculations for numbers that are derived from given case information must be clearly shown in your report (either in the body or as an attachment that is referenced). Your submission must be in one single word processed (.doc or .pdf) file inclusive of attachments; attachments are strongly discouraged. If you submit more than one document file, I will open only the first document and will assign a score based on whatever is in that document only. If you submit a document that does not immediately open in MS Word (or Adobe if PDF) because it has no file extension or submit a document that is not formatted to fit properly on 8.5x11 inch paper (e.g., a business report written using Excel rather than Word), I will assign a score of zero. Failure to include your name at the top of the document will result in a two letter grade penalty.
While you are encouraged to collaborate with other members of the class (on the Blackboard forum and on your own) when thinking about how to do calculations and how to resolve various issues in the case, THE WRITTEN REPORT THAT YOU SUBMIT MUST BE YOUR OWN WORK. Note that this is a marketing report, so a report that concludes on a numeric calculation is inadequate.
HOW/WHERE TO MAKE YOUR SUBMISSION
Be sure that you have selected the correct file! One way to ensure that you don't make any mistakes is to create a special directory on your computer that is used only for the final submission, and put only one file in it. That way, you won't accidentally click on the wrong draft of your submission or unintentionally submit a letter you had intended to send to you great aunt.