A finished BUS-332 Topic 2 customer lifetime value calculation example, stating margin, retention and discount inputs openly and rerunning the result as each one changes. Searches like "bus 332 topic 2 assignment example", "bus332 topic 2 sample" and "bus-332 topic 2 example" land here.
What a finished BUS-332 Topic 2 customer lifetime value calculation looks like
The finished calculation lists its inputs before producing any figure. Annual margin per customer, not revenue, is taken from the case at an illustrative 200 after the cost of servicing a lawn. The retention rate of 80 percent comes from contract records showing how many customers renewed, not from a survey of intentions. A 10 percent discount rate is attributed to the company's finance function. The example names the simple constant-margin formula it uses and what that formula assumes, then produces a lifetime value of about 533. Sensitivity follows: at 90 percent retention the figure rises to 900, and at 70 percent it falls to 350. The closing passage sets the result against the cost of winning a customer and says what the spread implies for retention spending.
How a BUS-332 Topic 2 example is structured
The calculation is presented as a short technical note a marketing manager could hand to finance. Its first section defines the customer being valued and the period used, since a monthly and an annual view produce different retention rates. The inputs section follows, giving margin, retention and discount rate one paragraph each with a source for every figure. A formula section states the method in words and symbols, together with the assumptions it makes about constant margin and an open-ended horizon. The result is then produced with the substitution shown. A sensitivity table reruns the figure at higher and lower retention and at a different discount rate. The note ends by comparing lifetime value with acquisition cost and stating how much the company could sensibly spend to keep one customer.
Margin used in place of revenue
Revenue overstates what a customer is worth, so the example subtracts the cost of serving each lawn before any lifetime figure is built.
Retention taken from renewal records
The rate comes from how many contracts actually renewed, which is behavior, instead of from customers saying they intend to stay.
The formula and its assumptions named
Constant margin and an open-ended horizon are stated plainly, so a reader knows where the simple method would stop describing this business.
Retention moved up and down
Rerunning the figure at 70 and 90 percent retention shows the answer swinging widely, which is the finding a manager most needs to see.
Spending limits drawn from the result
Lifetime value set against acquisition cost gives a ceiling on retention spending per customer, which turns the calculation into a budgeting tool.
Where marks go in BUS-332 Topic 2
A lifetime value figure presented without its inputs tells the reader almost nothing, because margin, retention and discount rate determine the entire result and a different set would produce a different answer. Using revenue per customer in place of margin overstates value, often by a wide amount in service businesses. A retention rate lifted from a satisfaction survey measures intention, not renewal. Skipping the discount rate treats money received years from now as equal to money received this year. Papers that produce one figure without sensitivity hide how fragile it is, especially to retention. Averaging across all customers is also criticized, since a single mean can conceal a small group of very valuable accounts beside many marginal ones, which later topics typically take up.
Get a BUS-332 Topic 2 example written to your instructions
Send the BUS-332 Topic 2 instructions and the rubric attached in your classroom, with the customer data your section supplies. We write a custom example to those instructions and that rubric, with margin used instead of revenue, retention sourced from behavior, the formula's assumptions named and the result rerun under changed inputs, in 24 to 48 hours. The first one is free.
BUS-332 Topic 2 questions, answered
Why use margin instead of revenue in lifetime value?
Because revenue includes the cost of serving the customer, which the business never keeps. A lawn care customer paying a substantial annual fee may leave a modest margin after labor, fuel and materials. Valuing customers on revenue makes every relationship look more valuable than it is and justifies retention spending that the margin cannot actually support over the life of the account.
Where does a retention rate come from?
From records of what customers actually did. Of the customers active when a period opens, the retention rate is the share still active when it closes. Contract renewals, repeat orders and account closures all supply it. Survey answers about intending to stay are a different measure, and they tend to run higher than the behavior that follows, so the example keeps them out of the calculation.
Why is lifetime value so sensitive to retention?
Because retention compounds. A customer must survive every period to reach the next, so a small change in the rate alters the chance of reaching each future year, and those changes multiply. In the illustrative case, moving from 80 to 90 percent retention raises lifetime value by more than two thirds. That sensitivity is why the source of the retention figure deserves as much scrutiny as the formula.