Analyze the Conroy Case Study and answer the questions. I have provided the two documents that outline the assignment in more detail. There will be an examination of the Conroy Acura Case PDF. After doing so, The Customer Lifetime Value and Return will give the prompts for the answers that I need.
Conroy’s Acura CLV and ROM Assignment
At the time of the case in 2006, Terrence Conroy was contemplating the challenge of how to increase the profitability of his dealership. With the rise of Internet car sales and the availability of competitive market pricing information, Conroy’s Acura is finding it more and more difficult to attract new customers and retain existing customers.
Your Task:
Assume you have just been hired as an Analyst at Conroy’s Acura. You have been observing the debate between Vice President of Sales, Rachel Di Lima, and the sales staff. Di Lima advocates more resources be allocated to retaining existing customers while the sales staff argues that in order to be competitive prices need to be lower.
You recall from your Principles of Marketing class a concept called Customer Lifetime Value and you suggest that a CLTV model might be a good way to determine which approach would be best. Terrence Conroy says he doesn’t know what a CLTV model is but if you can build something that will help settle debate, he would want to see it.
For this assignment focus on the following 4 questions. For each question, please be specific, show your work, and clearly & concisely articulate any logic and/or assumptions required to support your response. It is up to you on how best to submit your responses, but I recommend an Excel file with embedded text boxes to explain your logic and answers.
Question 1: Using a spreadsheet program [i.e. Excel or Google Sheets], construct a CLTV model based on the information available in the case. Though all of the key data points are located within the case text, much of the information is summarized on page 4. Note that a formal CLTV formula is provided on page 5.
Question 2: Evaluate Di Lima’s focus on increasing the retention rate. Specifically, Di Lima wants to double the current marketing budget allocated to retention. How much would the retention rate need to increase in order for this additional expense to be justified?
Question 3: Evaluate the sales team’s recommendation of lower markups. If Conroy’s Acura decides to lower their markup to 6%, how many additional cars would they need to sell to cover the price decrease?
Question 4: Now that you have built your CLTV model and understand the dynamics of the business, what sort of strategy would you advocate and why? Note that you do not need to confine your options to the two strategies proposed by Di Lima and the sales team.
