A subscription food delivery service, Extra Tasty, is planning to launch four precooked meal packages. They intend to hire a celebrity chef to develop the recipes offered in the four new packages: Vegan, Glu-free, MeatLove, and Keto. Extra Tasty will spend $15,000 to hire a top chef to create the recipes and $225,000 on marketing. The prices and variable costs of the meal packages are:

- [tex] P_{\text{Vegan}} = \$312, \, VC_{\text{Vegan}} = \$70 [/tex]
- [tex] P_{\text{Glu-free}} = \$280, \, VC_{\text{Glu-free}} = \$62 [/tex]
- [tex] P_{\text{MeatLove}} = \$336, \, VC_{\text{MeatLove}} = \$80 [/tex]
- [tex] P_{\text{Keto}} = \$240, \, VC_{\text{Keto}} = \$48 [/tex]

They expect to sell the packages in the ratio 4:5:7:3, respectively. The total customer base of Extra Tasty is 15,000 customers.

1. Calculate the breakeven quantity for each model. [4]

2. Assume that customers who buy certain packages don’t switch to different ones, but the probability of staying with Extra Tasty from month to month has been 75%, 82%, 68%, and 85%. Assuming a discount rate of 4% annually, calculate the CLV for customers in each meal plan segment. Use the total contribution for each meal plan from part (a) as the (annual) margin in each case, and remember to subtract the AC (which is the FC/customer base). [4]

3. If Extra Tasty has $300,000 to spend on increasing the retention rate in the segment with the highest CLV, what would the retention rate need to increase to, in order to justify spending that amount on retention? (Hint: Number of customers would be the sales mix fraction times the total customer base. Change M by subtracting $300,000/number of customers in that segment. Rearrange the CLV formula in terms of r gives the following). [3]

\[
r = \frac{(\text{CLV} + \text{AC})(1 + d)}{(M + \text{CLV} + \text{AC})}
\]

4. Suppose that instead of spending on retention, Extra Tasty would like to increase the number of customers from its highest CLV segment. It is considering an ad buy for the $300,000, which will be viewed by 500 potential customers in that segment. What percent of the targeted customers would need to join in order for the acquisition spending to be worthwhile? Add a sentence to explain what your answer means. [3]

- Breakeven Acquisition Rate = \(\frac{\text{Acquisition Spending}}{\text{CLV}}\)

5. Again, just looking at the highest CLV segment, suppose that instead of spending the whole $300,000 on the ad buy, Extra Tasty would like to consider spending some of the funds on ads and some on coupons. Assuming that:

- Option 1: Spending the $300,000 on advertising would have brought in 1,500 customers
- Option 2: Spending $175,000 on ads, and offering a $40 coupon would draw 2,500 new customers
- Option 3: Spending $175,000 on ads, and offering a $30 coupon would draw 1,800 new customers

Calculate the new CLV for each option [3]:

- $300,000 on ads
- $175,000 on ads and a $40 coupon
- $175,000 on ads and a $30 coupon

Hint: (Ad spending/number who switched) + coupon).

6. Calculate the total segment value for those new customers for each option from part (i). (Hint: CLV * number of new customers).