Business & Finance – Marketing This Assignment For Brand/company Analysis

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Delta Airlines CLV Calculations

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Delta Airlines CLV Calculations

Customer lifetime value analysis informs strategic decision-making by quantifying the expected net present value of future customer relationships for Delta Airlines. In this case, I will use the discounted cash flow methodology, which integrates revenue, cost, retention, and discount rate assumptions to estimate value over time (Çavdar & Ferhatosmanoğlu, 2018). This report applies a discounted cash flow CLV model to Delta’s passenger segments: business travelers, leisure flyers, and occasional customers, using publicly available data (Delta Air Lines, Inc., 2025a). In this context, revenue inputs are derived from Delta’s 2024 financial results and boarding data, cost inputs are derived from operating expense breakdowns and CASM figures, retention assumptions are derived from loyalty trends and industry averages, and discount rates are derived from third-party financial estimates (Delta News Hub, 2024). The analysis proceeds through organizing data, specifying assumptions, implementing the CLV formula in a structured step-by-step approach, and interpreting outcomes. This structure ensures methodological clarity, transparent assumptions, and actionable insights for marketing budget allocation and loyalty investments.

Assumptions and Justifications

The first assumption is the average revenue per boarding. Moreover, Delta’s full-year 2024 operating revenue of 61.6 billion US dollars divided by reported boardings of over 200 million yields approximately 308 US dollars per boarding (Delta Air Lines, Inc., 2025a). This per-boarding figure serves as a base for segment revenue estimates. Treating each boarding as a discrete transaction aligns with industry practice when unique customer counts are unavailable.

The second assumption is annual boardings per customer segment. Moreover, industry trip frequency surveys indicate that business travelers average six boardings per year, leisure flyers average three boardings per year, and occasional customers average one boarding per year (Airlines for America, 2018). Consequently, the average annual revenue per customer approximates 1848 US dollars for business travelers, 924 US dollars for leisure flyers, and 308 US dollars for occasional customers. Additionally, these segment definitions capture differences in spending patterns and loyalty, which are essential for precise CLV analysis.

The third assumption is the servicing cost per boarding and per customer per year. A non fuel cost per available seat mile of 0.1372 US dollars and an average stage length assumption of 1000 miles yields approximately 137.20 US dollars non fuel cost per boarding, and adding an estimated fuel cost per boarding of 76.52 US dollars produces a total servicing cost per boarding of approximately 213.72 US dollars (Delta Air Lines, Inc., 2025b). The annual servicing cost per customer equals 213.72 US dollars times boardings per year: about 1282.32 US dollars for business travelers, 641.16 US dollars for leisure flyers, and 213.72 US dollars for occasional customers. Additionally, deriving cost inputs from CASM figures and fuel proxies ensures defensible assumptions without proprietary marginal cost data.

The fourth assumption is the acquisition cost per new customer. Moreover, an annual advertising expense of approximately 280.8 million US dollars divided by an estimated 20 million new customers yields about 14.04 US dollars in acquisition cost per new customer. This proxy uses market penetration dynamics and boarding data. Additionally, acknowledging uncertainty in new customer estimates highlights the need for refinement if internal acquisition metrics become available.

The fifth assumption is retention rates and expected tenure. Loyalty program patterns and industry averages suggest annual retention rates of 80 percent for business travelers, 70 percent for leisure flyers, and 50 percent for occasional customers, implying average tenures of about five years, three years, and two years, respectively (International Air Transport Association, 2025). These values reflect higher loyalty among frequent flyers and limited repeat behavior among occasional customers.

The sixth assumption is the discount rate. Delta’s weighted average cost of capital is around 10.42 percent as of mid-2025, which provides a discount rate for future net contributions (GuruFocus, 2025). Using this discount rate aligns CLV discounting with the firm’s cost of capital and reflects required return expectations. Noting that alternative discount rate estimates may differ encourages sensitivity testing around this figure.

CLV Calculations and Explanations

Step One: Calculate average revenue per boarding

· Total operating revenue (2024) ÷ total boardings (2024)

· 61.6 billion US dollars ÷ 200 million boardings = 308 US dollars per boarding

This calculation establishes the per-transaction revenue base. Dividing total revenue by total boardings yields average revenue per boarding. This report assumes each boarding contributes equally on average when unique customer counts are not directly available.

Step Two: Determine the average annual revenue per segment

· Business travelers: 308 US dollars × 6 boardings per year = 1848 US dollars

· Leisure flyers: 308 US dollars × 3 boardings per year = 924 US dollars

· Occasional customers: 308 US dollars × 1 boarding per year = 308 US dollars

This yields annual revenue per customer by segment. Multiplying average revenue per boarding by assumed annual boardings for each segment captures differences in usage patterns and potential revenue contributions.

Step Three: Compute the servicing cost per boarding and the annual servicing cost per segment

Servicing cost per boarding

· Non fuel cost: 0.1372 US dollars per ASM × 1000 miles = 137.20 US dollars

· Fuel cost proxy: 76.52 US dollars per boarding

· Total servicing cost per boarding = 213.72 US dollars

Annual servicing cost per segment:

. Business travelers: 213.72 US dollars × 6 = 1282.32 US dollars

. Leisure flyers: 213.72 US dollars × 3 = 641.16 US dollars

. Occasional customers: 213.72 US dollars × 1 = 213.72 US dollars

These values represent annual variable cost obligations per customer. Calculating the servicing cost per boarding uses CASM and fuel estimates. Multiplying by boardings per year yields annual servicing cost per customer for each segment, which is subtracted from annual revenue to derive net contribution.

Step Four: Establish the acquisition cost per new customer

· Annual advertising expense ÷ estimated new customers

· 280.8million US dollars ÷ 20 million new customers = 14.04 US dollars per customer

This is the initial negative cash flow in the CLV model. Dividing total marketing expense by estimated new customer count yields the acquisition cost per new customer. This report assumes uniform acquisition cost across segments.

Step Five: Define retention probabilities and tenure horizon

· Business travelers’ retention: 0.80 annual rates. The probability retained to year t = 0.80^t; the tenure horizon is five years

· Leisure flyers retention: 0.70 annual rates. The tenure horizon is three years

· Occasional customer retention: 0.50 annual rate. The tenure horizon is two years

These probabilities guide year-by-year net contribution inclusion. Applying geometric decay reflects a decreasing likelihood of retention each year. Setting a horizon where retention probability becomes minimal prevents overstating value beyond a meaningful period.

Step Six: Apply discount rate for present value

· Discount rate: 10.42 percent annually

· Discount factor per year t: (1 + 0.1042) ^ t

This factor adjusts future net contributions to present value. Using the firm’s WACC aligns CLV discounting with the required return.

Step Seven: Calculate net annual contribution per segment

· Business travelers: annual revenue 1848 US dollars − annual servicing cost 1282.32 US dollars = 565.68 US dollars

· Leisure flyers: annual revenue 924 US dollars − servicing cost 641.16 US dollars = 282.84 US dollars

· Occasional customers: annual revenue 308 US dollars − servicing cost 213.72 US dollars = 94.28 US dollars

The acquisition cost of 14.04 US dollars applies at year zero for each new customer. Net annual contribution equals revenue minus servicing cost; acquisition cost is treated separately as initial outflow.

Step Eight: Compute discounted net contributions and derive CLV per segment

Business travelers:

· Year 1: (565.68 × 0.80) ÷ (1.1042) ^ 1 = 409.93 US dollars

· Year 2: (565.68 × 0.80^2) ÷ (1.1042) ^ 2 = 297.05 US dollars

· Year 3: (565.68 × 0.80^3) ÷ (1.1042) ^ 3 = 215.18 US dollars

· Year 4: (565.68 × 0.80^4) ÷ (1.1042) ^ 4 = 155.78 US dollars

· Year 5: (565.68 × 0.80^5) ÷ (1.1042) ^ 5 = 112.92 US dollars

· The sum of discounted net contributions = 1190 US dollars

· Subtract the acquisition cost of 14.04 US dollars. The CLV is 1176 US dollars.

Leisure flyers:

. Year 1: (282.84 × 0.70) ÷ (1.1042) ^1 = 179.36 US dollars

. Year 2: (282.84 × 0.70^2) ÷ (1.1042) ^2 = 113.65 US dollars

. Year 3: (282.84 × 0.70^3) ÷ (1.1042) ^3 = 72.01 US dollars

. Sum = 365.02 US dollars

. Subtract the acquisition cost of 14.04 US dollars. The CLV = 351 US dollars.

· Occasional customers:

. Year 1: (94.28 × 0.50) ÷ (1.1042) ^1 = 42.70 US dollars

. Year 2: (94.28 × 0.50^2) ÷ (1.1042) ^2 = 19.33 US dollars

. Sum = 62.03 US dollars

. Subtract the acquisition cost of 14.04 US dollars. The CLV = 48 US dollars.

For each segment, discounted net contributions are summed over the tenure horizon, then subtracted from the acquisition cost to yield CLV. These values reflect the net present value per new customer under base case assumptions.

In conclusion, synthesizing CLV outcomes clarifies Delta Airlines' strategic priorities. Business travelers present the highest CLV at 1176 US dollars, leisure flyers yield a moderate CLV at 351 US dollars, and occasional customers yield a low CLV at 48 US dollars. These results indicate that prioritizing retention investments and personalized offerings for high-value segments maximizes return on marketing spend. Additionally, focusing acquisition efforts on segments where CLV substantially exceeds acquisition cost enhances profitability while exploring ways to encourage occasional customers toward higher frequency, which supports long-term value growth.

References

Airlines for America. (2018). Air travel survey: On average, American adults took 2.5 airline trips in 2017; flyers took 5.3 trips. Retrieved June 20, 2025, from https://airlines.org/wp-content/uploads/2018/02/A4A-AirTravelSurvey-20Feb2018-FINAL.pdf

Çavdar, A. B., & Ferhatosmanoğlu, N. (2018). Airline customer lifetime value estimation using data analytics supported by social network information. Journal of Air Transport Management, 67, 19–33. https://doi.org/10.1016/j.jairtraman.2017.10.007

Delta Air Lines, Inc. (2025a). Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Retrieved June 20, 2025, from https://ir.delta.com/files/doc_financials/2024/q4/DAL-12-31-2024-10K-2-11-25-Filed.pdf

Delta Air Lines, Inc. (2025b). Delta Air Lines announces December quarter and full year 2024 financial results: Non-fuel CASM metrics. Retrieved June 20, 2025, from https://ir.delta.com/news/news-details/2025/Delta-Air-Lines-Announces-December-Quarter-and-Full-Year-2024-Financial-Results/default.aspx

Delta News Hub. (2024). Corporate stats and facts: Delta served more than 200 million customers in 2024. Retrieved June 20, 2025, from https://news.delta.com/corporate-stats-and-facts

GuruFocus. (2025). DAL (Delta Air Lines) WACC % as of June 19, 2025. Retrieved June 20, 2025, from https://www.gurufocus.com/term/wacc/DAL

International Air Transport Association. (2025). Global air passenger demand reaches record high in 2024. Retrieved June 20, 2025, from https://www.iata.org/en/pressroom/2025-releases/2025-01-30-01/

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Application Assignment Three

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Application Assignment Three

A suitable recent Delta Airlines advertisement is the 2025 Centennial Safety Video titled A Hundred Years of Safety, released March 21, 2025, which functions as a branded storytelling asset that doubles as required in-flight safety content while reinforcing the corporate heritage and innovation narrative (Delta, 2025).

Audience

The primary audience comprises current and prospective premium and loyalty-oriented travelers, including business travelers, high-yield leisure passengers, and SkyMiles members who value safety, reliability, service, and progressive digital enhancements.

Primary Objective

The immediate functional objective is regulatory safety instruction. However, the strategic brand objective is to strengthen trust, reinforce differentiation, and deepen loyalty by dramatizing a century-long safety record and innovation pipeline.

Message

The core message communicates that Delta’s century of operational experience, people-centric culture, and ongoing innovation make travel safer and continually improving today. This aligns with the Keep Climbing positioning that associates the brand with perpetual upward progress and internal career journey narratives, amplifying authentic human effort behind service quality. The safety video’s centennial framing leverages heritage plus present-day technological evolution introduced during the CES centennial keynote to future-proof trust.

Theme(s) or appeal(s) used

The key themes are heritage, trust, innovation, and human connection. A hundred-year milestone rationally reinforces heritage and reliability, while emotional resonance comes from people's stories in related internal journey features and a persistent narrative of striving. Innovation appeal is strengthened through AI concierge and multimodal mobility announcements, creating a forward-looking halo that complements safety assurances. Loyalty and clarity appeals are extended through recent fare family rebranding that promises transparent choices, enhances perceived control, and reduces cognitive risk, supporting the safety trust theme.

Specific Components Used to Convey the Message

The message is conveyed in a video that integrates archival imagery, anniversary visual marks, and contemporary cabin cinematography to juxtapose legacy and modernity, consistent with immersive centennial staging at CES Sphere.

Effectiveness of the Ad

Effectiveness can be evaluated against attention, comprehension, credibility, and brand equity reinforcement criteria. The centennial hook and novel creative setting increase attention while mandated instructional flow ensures comprehension. The heritage plus innovation juxtaposition increases credibility by pairing proven longevity with announced forward-looking service enhancements like AI concierge and multimodal options. The emphasis on journey and people aligns with storytelling-based loyalty drivers and personalization sustainability literature, identifying authenticity and narrative as levers of durable brand commitment.

Recommendations to Improve the Effectiveness of the Ad

Firstly, Delta should incorporate dynamic personalization features through the Fly Delta app by integrating AI concierge functions that offer customized ancillary product suggestions and sustainability insights after viewing the safety video. This approach aligns with the Personalization-Privacy Paradox Theory, which suggests that users are more willing to accept personalization when it adds authentic value and transparency (Rodrigues, 2024). According to Karlsson and Ryberg (2024), emotionally intelligent personalization, especially when aligned with customer values such as environmental awareness, significantly increases emotional attachment, brand trust, and subsequent loyalty.

Secondly, a brief overlay within or immediately following the video can highlight personalized SkyMiles milestones or exclusive centennial rewards. This supports both emotional gratification and perceived economic value. The Equity Theory of Customer Relationships (Vo & Van Nguyen, 2022) posits that customers remain committed to brands when the perceived value exchange is fair and rewarding. Milestone-based reward prompts enhance retention and willingness to engage with premium offerings, particularly in loyalty programs with high perceived status differentials.

Thirdly, incorporating an optional sustainability segment that showcases Delta’s emissions reduction or SAF initiatives can amplify authenticity and trust. This strategy aligns with the Theory of Planned Behavior, which indicates that providing credible, specific information increases intention to support eco-conscious brands. Environmentally conscious travelers were 41% more likely to recommend brands with visible eco-innovation messaging within their core communications (Sharma et al., 2024).

Finally, Delta can create targeted social media extensions that feature micro-narratives from both employees and frequent flyers tied to the centennial and Keep Climbing themes. This aligns with Narrative Transportation Theory, which explains that compelling stories increase ad effectiveness by transporting viewers into the brand world, leading to greater affective and behavioral responses (Yang & Kang, 2021). Segmented storytelling, where stories are customized for specific customer personas, can increase ad recall and brand affinity by over 30% compared to general brand messaging (Yang & Kang, 2021).

References

Delta. (2025). A Hundred Years of Safety – Delta's 2025 Centennial Safety Video. YouTube. https://www.youtube.com/watch?v=mnOLUnExHvw

Karlsson, J., & Ryberg, A. (2024). The Power of Customization: Exploring the impact of customized design and fit on user experience and perceptions of garments.

Rodrigues, A. M. D. C. G. (2024).  Navigating the Personalization-Privacy Paradox: Understanding the Impact of Online Ad Personalization on User Perceptions Throughout the Customer Journey (Master's thesis, Universidade NOVA de Lisboa (Portugal)).

Sharma, T., Chen, J. S., Ramos, W. D., & Sharma, A. (2024). Visitors’ eco-innovation adoption and green consumption behavior: the case of green hotels.  International Journal of Contemporary Hospitality Management,  36(4), 1005-1024. https://doi.org/10.1108/IJCHM-04-2022-0480

Vo, M. D., & Van Nguyen, S. (2022). Enhancing store brand equity through relationship quality in the retailing industry: evidence from Vietnam.  Cogent Business & Management,  9(1), 2149150. https://doi.org/10.1080/23311975.2022.2149150

Yang, K. C., & Kang, Y. (2021). Predicting the relationships between narrative transportation, consumer brand experience, love and loyalty in video storytelling advertising.  Journal of Creative Communications,  16(1), 7-26. https://doi.org/10.1177/0973258620984262

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Objective:

The objective of this assignment is to apply the concepts and tools learned throughout the course to analyze a brand or company. Students will create a 5-10 minute video presentation showcasing their analysis. Supporting documents, such as PowerPoint slides, graphs, data tables, and other relevant materials, should be uploaded alongside the video on Canvas.

Guidelines:

1. Selection of Brand/Company:

· Choose a brand or company that interests you and is relevant to the concepts covered in the course.

· Ensure you have access to sufficient data and information about the brand/company to conduct a thorough analysis.

2. Content of the Presentation:

· Introduction:

· Provide an overview of the brand/company.

· Explain why you chose this brand/company for your analysis.

· Market Analysis:

· Discuss the market in which the brand/company operates.

· Analyze the target audience and market segmentation.

· Competitive Analysis:

· Identify and analyze key competitors.

· Discuss the brand/company's competitive positioning.

· Marketing Strategies:

· Evaluate the current marketing strategies of the brand/company.

· Provide insights into digital marketing efforts, including social media presence and SEO.

· Customer Insights:

· Use available data to analyze customer behavior and preferences.

· Discuss customer satisfaction and feedback.

· Recommendations:

· Provide well-supported recommendations for improving the brand/company's marketing strategies.

· Suggest potential growth opportunities based on your analysis.

3. Video Presentation:

· Create a 5-10 minute video presentation.

· Ensure the video is clear and well-organized.

· Use visuals (slides, charts, graphs) to support your analysis and keep the audience engaged.

4. Supporting Documents:

· Prepare a PowerPoint presentation or other visual aids to accompany your video.

· Include graphs, data tables, and any other relevant materials.

· Upload these supporting documents alongside your video on Canvas.

5. Submission Instructions:

· Video Upload:

· Large video files can be difficult to upload directly to Canvas.

· Consider uploading your video to YouTube or a cloud service like Google Drive, OneDrive, or Dropbox.

· Ensure the privacy settings allow your instructor and classmates to view the video.

· Provide the link to the video in your submission on Canvas.

· Alternative Platforms:

· You can also use platforms like Microsoft Teams or Zoom to record and share your presentation.

· Make sure to adjust the access settings to allow viewers to watch the video.

· File Naming:

· Name your files clearly, including your name and the name of the brand/company you analyzed (e.g., "JohnDoe_BrandAnalysis_Presentation").

 

Evaluation Criteria:

Your presentation will be evaluated based on the following criteria:

· Content:

· Depth and accuracy of the analysis.

· Application of course concepts and tools.

· Organization:

· Clarity and structure of the presentation.

· Effective use of visuals and supporting materials.

· Delivery:

· Quality of the presentation (engagement, pacing, articulation).

· Adherence to the time limit.

· Recommendations:

· Practicality and feasibility of the recommendations.

· Support for recommendations with data and analysis.

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Marketing Assignment for Brand Equity Calculation

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Marketing Assignment for Brand Equity Calculation

Brand equity refers to the value attributed to a brand based on consumer perception, loyalty, and market strength. It reflects the premium a company can charge and its ability to generate long-term profits. For Delta Airlines, brand equity is shaped by its strong customer loyalty, operational excellence, premium service offerings, and expansive global network. This paper calculates Delta's brand equity using three methods: Cost Approach, Market Approach, and Financial Approach, with support from Delta's 2024 Form 10-K report. Spirit Airlines' 2024 Form 10-K is used for comparative analysis in the market approach.

Cost Approach

The Cost Approach estimates brand equity by evaluating the costs incurred to create and build the brand. This includes expenditures on marketing, legal, operational, and customer loyalty program costs, among others. The total operating expenses are $44.5 billion, employee profit sharing is $1.4 billion, and it runs a loyalty program known as the Skymiles program and co-branded partnerships with American Express (Delta Air Lines, Inc., 2025). Delta spends heavily on brand development through marketing, partnerships, and employee engagement. Given the specific numbers available, we assume that approximately 5% of Delta's total operating expenses are directed at brand-building activities. This percentage considers advertising, customer loyalty programs, fleet upgrades, and legal costs.

Brand Building Expenditures = 0.05×44.5 billion = 2.225 billion.

Thus, the estimated cost-based brand equity is $2.225 billion.

Market Approach

The Market Approach estimates brand equity by evaluating the revenue difference between Delta’s branded offering and a comparable unbranded or generic offering. Here, we compare Delta's revenue with that of Spirit Airlines, a low-cost competitor in the airline industry. Delta’s Revenue is $54.4 billion, while Spirit’s is $4.9 billion (Delta Air Lines, Inc., 2025; Spirit Airlines, Inc., 2025). The primary factor contributing to the difference in revenue is brand strength. Delta commands higher ticket prices, especially in its premium offerings such as Delta® and Comfort+, which are supported by its strong customer loyalty and operational reliability.

Revenue Difference = 54.4 billion − 4.9 billion = 49.5 billion.

Delta’s brand allows it to generate $49.5 billion more in revenue than Spirit, reflecting the premium Delta can charge for its services due to its brand strength. While thi