Question

A cable company spends, on average, $ 600 to acquire a customer. Annual maintenance costs per customer are $ 45. Annual record-keeping and billing costs are $ 30 per customer. While the price of the basic service to customers is $ 30/month, 40% of customers buys the premium package at $ j50/month and 10% buy the superpremium package at $ 80/month. Over time, 80% of all customers remains with the company in the long run. The firm uses a discount rate of 8%. What is the average CLV for all customers?

Answer 1

Average customer life value

CLV = 1260

Step-by-step explanation:

`Gross Margin *(retention)/(1+discount-retention) )= CLV`

Fis, we will calcualteteh gross margin.

For that we need the revenue:

We will calculate the average revenue per year:

50% 30 dollars per month = 180

40% 50 dollars per month = 240

10% 80 dollars per month = 96

average annual revenue per customer: 516

now we ill calcualte the gross margin:

revenue 516

maintenance (45)

administrative (30)

gross margin 441

`441 *(0.8)/(1+0.08-0.80) )= CLV`

CLV = 1260