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perations Activity #1: Value of a Loyal Customer 3,000 2500 Value of a Loyal Customer 1,500-1500 00 01 02 03 07 08 09 10 04 0

d. 1,125 2. If the defection rate doubles, what is the effect on the value of a loyal customer (VLC)? a. VLC does not change.

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Answer #1

Answer 2. Given the infirminfor and by looking at graph, it can be seen that if the defection rate doubles, the value of loyal customers fall by 50%. So, option b is correct.

Answer 3. Reducing the defection rate by 50%, doubles the value of loyal customers. Say, if defection rate falls from 0.2 to .0.1 , VLC increases from 1500 to 3000.

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