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Accurate Internet has an overall 75% retention rate. Each customer costs the company $50 in maintenance costs and $20 in record keeping and billing costs
Accurate Internet has an overall 75% retention rate. Each customer costs the company $50 in maintenance costs and $20 in record keeping and billing costs annually. Accurate offers its customers three different plans: the premium package, purchased by 30% of customers for $65 per month; the super-premium package, purchased by 20% of customers for $100 per month; and the basic package, purchased by the remaining customers for $40 per month. The company currently has 1 million customers. a. What is the customer lifetime value (CLV) of a (a) basic, (b) premium, and (c) super-premium customer? (Assume a 10% discount rate.) b. What is the weighted average customer lifetime value (CLV) of all customers? (Calculate the average using the CLVS & segment sizes presented in the problem above). C. What is the maximum it should be willing to spend to improve the customer retention rate of Premium Package customers from 75% to 85%
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