Question 1 1) The lifetime value of a typical customer in each segment when the discount rate is 15%. * Exhibit 1 shows that the customer lifetime value for each segment with a 15% discount rate. * The lifetime value of a typical customer in the platinum( top 20%) segment is worth $3496. * The lifetime value of a typical customer in the platinum( low 80%) segment is worth $2394. * The lifetime value of a typical customer in the gold ( top 20%) segment is worth $1415. * The lifetime value of a typical customer in the gold ( low 80%) segment is worth $769. * The lifetime value of a typical customer in the Silver( top 20%) segment is worth $406. * The lifetime value of a typical customer in the …show more content…

* Based on the data in the Exhibit 5, we could find that the most loyalty customers come from the platinum segment. If the company wants to increase its total value, it probably should utilize its limited budget to keep customers in the Silver segment, since about 31% loss comes from this segment. * * Question 4 * What do they recommend? And what are the key insights from their analysis? Are they recommending an increase or a decrease in the overall loyalty program budget? According to their recommendations, how should the budget be allocated? * ZENITH suggests that the company should cut the cost of loyalty program for the silver segment (low 80%) and inactive customers. And then using this saving budget to invest in other segments, especially for platinum segments. In this new optimization model, the total value actually increases about 31%(( 19749432-15024938)/15024938). The largest increase comes from the platinum segment. ( Exhibit 6) * Meanwhile, ZENITH also recommends that the company should improve the retention rates in each segment. The more customers choose Northern Aero, the more profit and value the company will obtain. In order to increase the retention rates, the company has to increase the invested cost in the loyalty program. For example, ZENITH suggests that the budget in the platinum segment and gold segment( top 20%) should be at least double. Although the cost is increasing,