Case Analysis
Maru Batting Centre
Customer Lifetime Value
Presented by:
Customer Relationship Management
Date:
June 17, 2025
MBC Background
• Maru Batting Center, a training center in Japan run by
Maru, who had a deep knowledge of game and
customers.
• Unlike in other countries, MBC was open only for
appointments made at least 24 hours in advance offered
with 8 batting cages that offered baseball and softball
pitching machines.
• MBC was operated with part time workers thereby
reducing labor costs.
Problem Statement
Maru lacked a marketing background, and she wanted Maru batting center to choose one customer segment that
would be profitable to her business in the future, which would also add a Customer Lifetime Value to the business
Customer Segments for MBC
Little Leaguers
Summer Sluggers
Elite Ballplayers
(Print Ad)
Elite Ballplayers
(Party)
Entertainment Seekers
Contact Cost
¥1,000
¥1,500
¥300
¥12,500
¥50
Response Rate
10.00%
15.00%
0.50%
25.00%
2.50%
Acquisition Cost
¥10,000
¥10,000
¥60,000
¥50,000
¥2,000
Retention Rate
75.00%
50.00%
60.00%
60.00%
35.00%
Total Cost Per Hour
(Worker+Instructor)
¥6,000
¥1,500
¥6,000
¥6,000
¥3,000
Retention Rate
75.0%
50.0%
60.0%
60.0%
35.0%
Hourly Price Charged
¥6,500
¥3,000
¥7,500
¥7,500
¥4,000
Hourly Margin ¥
¥500
¥1,500
¥1,500
¥1,500
¥1,000
Annual Hours
10
4
20
20
1.5
Annual Margin ¥
¥5,000
¥6,000
¥30,000
¥30,000
¥1,500
Interest Rate = 10%
What is the customer acquisition
cost to Maru Batting Center for
the following customers?
Customer Acquisition Cost
Formula used = Contact Cost/Response Rate
Little Leaguers
Summer Sluggers
Elite Ballplayers (Print Ad)
Elite Ballplayers (Party)
Entertainment Seekers
Contact Cost
¥1,000
¥1,500
¥300
¥12,500
¥50
Response Rate
10.0%
15.0%
0.5%
25.0%
2.5%
Acquisition Cost
¥10,000
¥10,000
¥60,000
¥50,000
¥2,000
Without discounting cash flows to take into
account the time value of money, how soon will
MBC break even on the following customers? In all
cases, assume that revenues and variable costs to
staff the cages occur on an ongoing basis but that
the acquisition costs are a one-time event.
Break Even points for each customer segment
Formula used: Annual Profit – Customer Acquisition Cost
Taking into account the time value of money and
assuming that 100 percent of a customer segment will
have experienced attrition once the net present value
of annual profits per customer falls below ¥100, what is
the lifetime value to MBC of the following customers?
Assume that a customer’s lifetime extends up to and
including the year in which the net present value of
annual profits falls below ¥100.
Customer Lifetime Value
Formula used:
Customer lifetime value: When the NPV of Annual Profit < 100 the corresponding NPV of
Cumulative Profit to Date
Net Value (CLV − CAC)
Segment
Customer Acquisition Cost (¥)
Customer Lifetime Value (¥)
Net Value (CLV − CAC) (¥)
Little Leaguer
¥10,000
¥15,482
¥5,482
Summer Slugger
¥10,000
¥10,903
¥903
Elite Ballplayer (Ad)
¥60,000
¥65,846
¥5,846
Elite Ballplayer (Gala)
¥50,000
¥65,846
¥15,846
Entertainment Seeker
¥2,000
¥2,129
¥129
A Little Leaguer - ¥5,482
A Summer Slugger - ¥903
An Elite Ballplayer if MBC places the ad in the local baseball enthusiasts magazine - ¥15,846
An Elite Ballplayer if MBC purchases the list and invites all target customers to the gala event - ¥5,846
Should MBC throw the gala event? – Yes as lifetime value is higher than CAC
An Entertainment Seeker - ¥129
Which is the most attractive
customer segment for MBC to
target? Explain your reasoning.
Segment Selection
Break-Even Point
Little Leaguers
Year 3
Summer Sluggers
Year 3
Elite Ballplayers (Print Ad)
Year 4
Elite Ballplayers (Party)
Year 3
Entertainment Seekers
Year 2
Final Selection –
Elite Ballplayers
Reason behind our Selection
Life time value of customer and
total profit contribution of each
customer is highest among other
customer segments
Targeting Elite ball players will
create a free promotion for MBC as
elite ball players will win more
competition, and MBC can use the
players to promote them
Targeting Elite ball players would create promotions for MBC due to
their elite level participation on various highly competitive levels
Reasoning for not selection of other segments: Low Retention Rate and Low Response Rate of other customer
segments in comparison with Elite ballplayers (party) strongly drives the decision making.
MBC has been approached by Little League representatives from the nearby Chiyoda ward who are
eager to gain the jersey subsidy the Minato ward has enjoyed due to the company’s sponsorship.
Because the parents of Chiyoda Little Leaguers will have to travel a greater distance, Maru believes
there will be a lower response rate (8 percent) and a lower retention rate (65 percent), which she can
make up for by purchasing slightly lower-quality jerseys, reducing the cost of sponsorship to just ¥600
per player. However, the Chiyoda ward representatives demand that theirs be the only ward receiving
such a sponsorship, which means MBC must choose between the two wards. The Chiyoda
representatives argue that because their ward has twice the numberof Little League customers, it is
more attractive than the Minato ward. Should MBC pursue the Chiyoda ward sponsorship? Explain your
reasoning.
Customer Lifetime Value
Ward
Acquisition Cost (¥)
Lifetime Value (¥)
Net Value (CLV − CAC) (¥)
Minato
¥10,000
¥15,482
¥5,482
Chiyoda
¥7,500
¥12,041
¥4,541
Minato Ward: Has a higher retention rate (75%) and response rate (10%) which drives greater customer loyalty and engagement.
With full-service training and premium jerseys, the annual margin per customer is ¥5,000, resulting in the highest net value per
customer (¥5,482). It is best suited for quality-focused growth and stable returns.
Chiyoda Ward: This has lower retention (65%) and response (8%), but benefits from cheaper acquisition (jersey cost of ¥600).
Despite reduced loyalty, it still offers a strong net value of ¥4,541 per customer. Chiyoda is more appealing if MBC’s goal is to scale
volume, especially since it has twice the number of Little Leaguers.
Recommendation: If MBC wants to maximize profit per customer, it should continue with Minato. If the goal is to maximize total
profit via scale, then Chiyoda is worth pursuing.
Maru’s brother suggested she focus on the Elite Ballplayers segment, targeting it by offering a ¥500
discount on all future purchases to Elite Ballplayers who purchase at least twenty batting cage hours in
Year 1. (Assume all Elite Ballplayer customers book exactly twenty hours each year. Also assume that
this discount is made on top of the gala event option above, instead of the magazine option for
acquiring Elite Ballplayers.) Although this will decrease the amount MBC can bill Elite Ballplayers (from
¥7,500 per hour to ¥7,000 per hour from Year 2 onward), Maru believes it will increase the retention rate
of these customers to 75 percent immediately. Should MBC offer this promotion? Explain your
reasoning.
Customer Lifetime Value
The
Elite
Ballplayers
(Party) – with discount
has an NPV of ¥22,656
The
Elite
(Print
Ad)
Ballplayers
–
with
discount has an NPV of
¥12,656
Originally Elite Ballplayers (Party) had customer lifetime value of 15916¥
Originally Elite Ballplayers (Print Ad) had customer lifetime value 5916¥
Therefore, NBC should go for the offer as it increases CLV for the party Elite BallPlayers
Limitations of CLV for MBC
•
•
•
THANK YOU
Presented by:
Group 5
Customer Relationship Management
Date:
June 17, 2025