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April 19, 2014

Homework Help: Marketing

Posted by Anonymous on Saturday, January 28, 2012 at 2:23pm.

Net-4-You is an internet service provider that charges its 1 million customers $19.95 per month for its service. The company's variable cost are $0.50 per customer per month. In addition, the company spends $0.50 per month per customer, or $6 million annually, on a customer loyalty program designed to retain customers. As a result, the company's monthly customer retention rate was 78.8 percent. Net-4-You has a monthly discount rate of 1 percent.

a.) What is the customer lifetime value?

b.) Suppose the company wanted to increase its customers' monthly retention rate and decided to spend an additional $0.20 per month per customer to upgrade its loyalty program benefits. By how much must Net-4-You increase it's monthly customer retention rate so as not to reduce customer lifetime value resulting from a lower customer margin?

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