Net-4-You: Monthly Customer Retention Rate
Not what you're looking for?
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 costs are $.50 per customer per month. In addition, the company spends $.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. Suppose the company wanted to increase its customers' monthly retention rate and decided to spend an additional $.20 per month per customer to upgrade its loyalty program benefits. By how much must Net-4-You increase its monthly customer retention rate so as not to reduce customer lifetime value resulting from a lower customer margin?
Purchase this Solution
Solution Summary
Solution contains calculations of expected increase in the monthly customer retention rate require for maintaining customer lifetime value resulting from a lower customer margin.
Solution Preview
Customer lifetime value = m(r/(1+I-r))
Where m = margin or profit from a customer per period= Monthly service charges ?variable cost ? Cost per customer per month for customer loyalty program designed to retain customers ...
Purchase this Solution
Free BrainMass Quizzes
Lean your Process
This quiz will help you understand the basic concepts of Lean.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Operations Management
This quiz tests a student's knowledge about Operations Management
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
Introduction to Finance
This quiz test introductory finance topics.