What is the customer retention cost if 120 customers remain after the month with 40 new customers and the value of free dinners redeemed was $240?

To determine the customer retention cost, you can use the formula:

Customer Retention Cost = Total Cost of Retained Customers / Number of Retained Customers

In this scenario, the total cost of free dinners redeemed was $240 and there were 120 customers who remained after the month.

Using the formula:

Customer Retention Cost = $240 / 120 = $2

This calculation shows that the cost incurred to retain each of the customers, based on the cost of free dinners, is $2.

The option of $3 likely derives from a misunderstanding of the arithmetic involved in the calculation. It’s crucial to carefully perform the division and ensure that the total cost is distributed accurately across the number of retained customers. Understanding how to calculate these costs can help businesses effectively manage their retention strategies and related expenses.