Imagine you are consulting for an Internet service provider (ISP) that has hired you to research...

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General Management

Imagine you are consulting for an Internet service provider(ISP) that has hired you to research the impact of customerretention on their bottom line. Assume that their current monthlyturnover is 3%, they have 1000 subscribers, they have set monthlysubscriber fees at $25, and they estimate that their cost to servecustomers is $10. Further, while they report that they do not havean estimate for customer acquisition cost, you do a little numbercrunching and find that they are spending $10 advertising for eachnew customer, they are offering their employees a $5 incentive tosell the service and they provide free installation software thatcosts $10. You also feel that a 5% interest rate is a reasonableprediction. Using this information, calculate the following:
a.) Annual turnover rate
b.) Annual customer turnover number
c.) Margin per month
d.) Break Even Value
e.) Customer Lifetime Value

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4.5 Ratings (901 Votes)

Monthly Subscriber Turnover 3 churn rate monthTherefore retention rate 1 churn rate 97Total Number of Subscribers 1000a Annual Turnover Rate 36 b Therefore Annual Turnover 12 3 36 of 1000 360SubscribersMonthly Subscription Fee 25Cost to See Answer

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