Question
A tech company that sells its products to business customers offers three different services that address different needs. Although it has customers for the three
A tech company that sells its products to business customers offers three different services that address different needs. Although it has customers for the three services, each customer uses only one of them. The firm's annual revenue is $26.2 million and variable cost of $3.5M. Its current annual customer retention rate is 77%. The firm is considering investing in training its customer service representative to cross-sell its product offerings. The current share of wallet is 10% (i.e., of the total money customers spent on tech services and products, they spent only 10% with the focal firm). The firm estimates that the cross-selling effort will increase the share of wallet from 10% to 12%. Assume every product is priced similarly and yields the same profit. The discount rate is 10%. What is the maximum amount that the firm should be willing to spend on this effort?
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