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Allstate sells auto insurance to many customer segments. Consider a segment of customers whose semiannual insurance bill is $345. 1. If the average variable cost of providing auto insurance coverage is 75 percent of the price, what is the variable cost of insurance? 1. If the customer acquisition costs are $50 per customer and the customer retention costs are 20 percent of the customer acquisition costs, what are the customer retention costs per customer? 1. If the annual retention rate is 90 percent, what is the semiannual retention rate? 1. If the applied annual discount rate is 8 percent, what is the semiannual discount rate? 1. Assume that the price and average variable cost don't change over time. What is the customer lifetime value of a customer in this market segment? 1. If Allstate failed to satisfy this segment and retention rates dropped to 85 percent, what would be the new customer lifetime value of a customer in this market segment? 1. If Allstate took steps to improve customer retention rates to 95 percent, what would be the new customer lifetime value of a customer in this market segment? 1. How much should Allstate be willing to pay, on a per-customer basis, for improving retention rates for this segment from 90 percent to 91 percent?

Allstate sells auto insurance to many customer segments. Consider a segment of customers whose semiannual insurance bill is $345. 1. If the average variable cost of providing auto insurance coverage is 75 percent of the price, what is the variable cost of insurance? 1. If the customer acquisition costs are $50 per customer and the customer retention costs are 20 percent of the customer acquisition costs, what are the customer retention costs per customer? 1. If the annual retention rate is 90 percent, what is the semiannual retention rate? 1. If the applied annual discount rate is 8 percent, what is the semiannual discount rate? 1. Assume that the price and average variable cost don't change over time. What is the customer lifetime value of a customer in this market segment? 1. If Allstate failed to satisfy this segment and retention rates dropped to 85 percent, what would be the new customer lifetime value of a customer in this market segment? 1. If Allstate took steps to improve customer retention rates to 95 percent, what would be the new customer lifetime value of a customer in this market segment? 1. How much should Allstate be willing to pay, on a per-customer basis, for improving retention rates for this segment from 90 percent to 91 percent

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