MARU BATTING CENTER CASE

Javier Andres Mora Arteaga

Global MBA ICESI – Tulane University

Question 1
To calculate the acquisition cost for each segment I divided the contact cost by the response rate.
So, I have that for Little Leaguer the cost was: ¥10.000, for Summer Sluggers it was ¥10.000;
for Elite Ballplayers (Print ad) it was ¥60.000; Elite Ballplayers (party) it was ¥50.000 and for
Entertainment seekers it was ¥2.000.
These results show that the Elite Ballplayers ad is the group with the highest acquisition cost,
and the Entertainment seekers is the one with the lowest. It can be explained because the low
response in Elite Ballplayers ad group, which suggest this strategy is not effective to get new
costumers.

Question 2
In the Little Leaguer, Summer Sluggers,) and Elite Ballplayers (party) segments, the MBC break
even occurred in the 3th year. Elite Ballplayers (Print ad) it happened in the 4th year.
For Entertainment seekers segment, it happened in the 2th year.

Question 3
CLV Little Leaguer: 8822,73
CLV Summer Sluggers: 1737,73
CLV Elite Ballplayers (Print ad): 13581,8
CLV Elite Ballplayers (party): 22672,7
CLV Entertainment seekers it was 250

Elite Ballplayers (party) is the segment with major profitability and CVL. The party definitively
should be performed.
Question 4:
The most attractive customer segment is the Elite Ballplayers (Party) because the break point is
reached at third year, the retention rate is higher, with a high CLV, the profit margin is
significantly higher than others segments.

Question 5:
Although the Chiyoda ward is twice than Little league, we consider that MBC should continue
with the second one, because this has more profits and the CVL is higher.

Question 6
I think Maru should follow her brother´s advice, because with this discount the retention rate
increases and this raises the profit and CVL from 22K to 35K.

Question 7
Maru shouldn´t offer the promotion, because it increases a little the response rate, with a higher
cost, but without increase the retention rate (which at the end is the most important element in
this equation to generate more profits), and with negative profits all the time, with a NPV
negative.

That is because they have the highest Customer Lifetime Value of all segments, they bring a lot
of revenues and compensate for the big investments. However, since they are not a large group,
MBC needs other segments too, such as the Little Leaguers, to cover the costs and take
advantage of the facilities the rest of the hours.
Question 6: Calculating the new CLV after the price discount and the increase of the retention
rate, we conclude that the loss in revenue is compensated by the higher retention rate. The
lifetime of Elite Ballplayers increases by 4 years, so as the total CLV, as we can see in table 4
and 5 of the Appendix. As a result, we conclude that such a price promotion would benefit a
company, as long as it leads to greater CLV, so MBC should offer the discount.