According to a study by Bain & Company, increasing customer retention rates by just 5% increases profits by 25% to 95%. Whats more, 82% of companies agree that retention is cheaper to execute than acquisition, according to an e-Consultancy report released last month.

For a firm with a recurring gross or contribution margin per customer of $99 per month and a current retention rate of 80% per year, by what percentage does gross margin increase for a 7% increase in customer retention? You may assume a 10% discount rate.