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Western Athletic Club International (WACI) owns and operates a chain of fitness clubs and is interested in estimating the Customer Lifetime Value (CLV) for new memberships. Practically all of WACI's costs are fixed costs, meaning that when a member pays his or her monthly dues, there are no variable costs associated with that payment, and all the revenues go toward covering the fixed costs of the business (facilities, salaries, equipment, etc.). WACI's monthly membership dues are $57 per person. The average member keeps his or her membership active for 18 months.

In addition to membership, WACI also offers personal training services through a staff of independent athletic trainers. WACI and the trainer split the fees associated with personal training 50/50. Historically, 9% of members choose to use a personal trainer for, on average, 28 training sessions. Sessions with a personal trainer are priced at $60 each.

Calculated Variables:
- CLV of membership (clvmem): $1,026
- Monthly membership margin: $57

What is the CLV of the personal training component for a member who chooses to hire a trainer?

Answer :

Final answer:

The Customer Lifetime Value (CLV) of the personal training component for a member who chooses to hire a trainer at WACI is $783.

Explanation:

To calculate the Customer Lifetime Value (CLV) of the personal training component for a member who chooses to hire a trainer at WACI, we need to consider the revenue generated from the personal training sessions.

The average member who chooses to hire a personal trainer attends 28 training sessions, and each session is priced at $60. Therefore, the total revenue generated from personal training for a member is calculated as follows:

Total Revenue = Number of Sessions * Price per Session = 28 * $60 = $1,680.

Since WACI and the trainer split the fees 50/50, the revenue for WACI is $1,680 / 2 = $840.

The CLV of the personal training component for a member who chooses to hire a trainer is the revenue generated from personal training ($840) minus the margin per member ($57) for the duration of the membership (18 months).

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