What is the average value of a loyal customer (VLC) in a target market segment if the average purchase price is $70 per visit, the frequency of repurchase is every month, the contribution margin is 20%, and the average customer defection rate is 25%? If a continuous improvement goal is set of a 20% defection rate next year and 15% two years from now, what are the revised VLCs over their average buying life?

To find the average value of a loyal customer (VLC) in a target market segment, we need to consider the average purchase price, the frequency of repurchase, the contribution margin, and the average customer defection rate.

First, we can calculate the repeat purchase rate (RPR) by subtracting the defection rate from 1:

$$RPR = 1 - \text{defection rate}$$

In this case, the defection rate is 25%, so the repeat purchase rate is:

$$RPR = 1 - 0.25 = 0.75$$

Next, we can calculate the average purchase value (APV) by multiplying the average purchase price by the contribution margin:

$$APV = \text{average purchase price} \times \text{contribution margin}$$

In this case, the average purchase price is 70 and the contribution margin is 20%, so the average purchase value is:

$$APV = 14$$

Now we can calculate the average value of a loyal customer (VLC) by multiplying the average purchase value by the repeat purchase rate and dividing by the defection rate:

$$VLC = \frac{APV \times RPR}{\text{defection rate}}$$

Substituting the values we have:

$$VLC=\frac{14\left(0.75\right)}{0.25}$$

Simplifying:

$$VLC=\frac{10.5}{0.25}$$

$$VLC=42$$

So the average value of a loyal customer in the target market segment is 42 dollars.

Now let's calculate the revised VLCs over their average buying life, considering the continuous improvement goal of a 20% defection rate next year and 15% two years from now.

To calculate the VLC for next year, we use the same formula as before but with a 20% defection rate:

$$VLC_{\text{next year}} = \frac{APV \times RPR}{\text{defection rate next year}}$$

Substituting the values we have:

$$VLC_{\text{next year}}=\frac{14\left(0.75\right)}{0.2}$$

Simplifying:

$$VLC_{\text{next year}}=\frac{10.5}{0.2}$$

$$VLC_{\text{next year}}=52.5$$

Similarly, we can calculate the VLC for two years from now using a 15% defection rate:

$$VLC_{\text{two years from now}} = \frac{APV \times RPR}{\text{defection rate two years from now}}$$

Substituting the values we have:

$$VLC_{\text{two years from now}}=\frac{14\left(0.75\right)}{0.15}$$

Simplifying:

$$VLC_{\text{two years from now}}=\frac{10.5}{0.15}$$

$$VLC_{\text{two years from now}}=70$$

So the revised VLC over their average buying life is 42, 52.50, and 70 for the present, next year, and two years from now, respectively.

Answer: The revised VLCs over their average buying life are 42, 52.50, and 70 dollars for the present, next year, and two years from now, respectively.