(Solved Homework): You own an athletic clothing and equipment store selling competition quality football, baseball, basketball…

You own an athletic clothing and equipment store selling competition quality football, baseball, basketball,

soccer, tennis, and volleyball items. Because this is not Walmart and Dicks Sporting goods low to mid level

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merchandise, the average purchase price is $250.00 dollars. Generally the parents start buying from you

when they put their kids in academy and travel leagues around age 8 unitil age 18. You get a good ten

years of sales at least 4 times a year per child. What is the customer lifetime value?

A. $60,000.00

B. $25,000.00

C. $2,500.00

D. $10,000.00

The customer equity is the total combined customer lifetime values of the company’s customers. What

will be the customer equity of your athletic clothing and equipment business if you have 350 regular

customers?

Expert Answer

Let us consider the following notation,

The average purchase price of the sporting goods, A = $250.00
Number of years of sales, B = 10 years
Number of instances of purchase, C = 4 times/year/child

Customer life time value = A * B * C = $ 250 * 10 * 4 = $ 10,000

Hence option D is correct.

If there are a total of 350 customers, the customer equity = $ 10,000 * 350 = $ 3,500,000

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