Finance Maru Case Study
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1. Calculate Breakeven cost (without discounted cash flow) per segment i. Little Leaguers
Year 3, when their “Cumulative Profit to Date” turns ¥1,563 from (¥1,250) ii. Summer Sluggers
Year 3, when their “Cumulative Profit to Date” turns ¥500 from (¥1,000) iii. Elite Ballplayers (print ad)
Year 4, when their “Cumulative Profit to Date” turns ¥5,280 from (¥1,200) iv. Elite Ballplayers (party)
Year 3, when their “Cumulative Profit to Date” turns ¥8,800 from (¥2,000) v. Entertainment Seekers
Year 3, when their “Cumulative Profit to Date” turns ¥25 from (¥500)
2. Calculate CLTV (with discounted cash flow) per segment
The CLTV for each segments are in the attached excel chart.
3. Which is the most attractive customer segment for MBC to target? Explain your reasoning. In my opinion, I think the “Little Leaguers” is the most attractive customer segment for MBC to target. First of all, due to the reason that most of the children in Japan tend to play softball and baseball, Little Leaguers has a high retention rate of 75%. This is really high compare to other customer segments. 10% of their customers become regular customers. And their core segment is really large as well. All of these above reflected the large amount of customers that Maru can gain.
Second, though this segment needs two workers and one instructor, their parents are still willing to pay extra more to let their children experience and learn from the batting center, which results a ¥500 in their hourly margin. Comparing to other segments, Little Leaguers might have the lowest hourly margin, however, every customer purchased ten hours (second high among all segments) in average per year, which lead them to ¥5,000 for their annual margin. Third, the acquisition of customers with the cost of ¥10,000 isn’t too large to cover up with the profit in following years. The middle school teams that Maru sponsored will receive clothes with MBC logo and phone number on the arms. And the MBC advertisement will also be shown on the league rulebooks. This is a great placement marketing that can efficiently increase their reach and end up with a really great response rate. Sponsoring middle school teams can also help Maru target other family members by leaving good and professional brand image.
Last but not least, as you can see, the figures in the excel chart shown that after 23 years, the Little Leaguers’ NPV of Cumulative Profit to Date is the highest among all the other segments. Which means that Maru earn most from this customer segment. 4. Should MBC pursue the Chiyoda ward sponsorship or stick with Minato? Explain your reasoning. I think MPC should pursue the Chiyoda ward sponsorship. As you can see in the excel chart, the Chiyoda’s Cumulative profits per customer (net of acquisition costs) is ¥21,423.88 compare to Minato’s ¥5,711.94. Chiyoda’s profit is four times bigger than Minato’s! If MBC wants to earn more, instead of sticking with Minato, they should definitely pursue the Chiyoda ward sponsorip.