Question
acob has written a game app that has been accepted by the iTunes App Store. The app will sell for $4.99, and it is expected
acob has written a game app that has been accepted by the iTunes App Store. The app will sell for $4.99, and it is expected to attract 1,093 users when it is introduced. While not absolutely necessary, app users can purchase items and extra powers, such as the ability to speed up the growth of a potent substance that can be used to defeat enemies, at an additional cost. It is estimated that 784 of the original 1,093 users will spend $5.75 each in the month after the purchase. In the following three months, a slight drop in the initial users is anticipated, but the remaining group is expected to spend more to purchase additional items and extra powers. If Jacob spends nothing on remarketing costs, it is assumed that the app will play itself out after six monthsi.e., none of these users will continue to play unless Jacob commits to spending something on remarketing, which he does not plan to do, believing that the life cycle of the app is probably six months. Jacob will earn a profit margin of 80% on all sales. Estimate the CLV using the cohort and incubate method, assuming a monthly discount rate of 1% and the projected monthly sales provided below:
Period 0 1 2 3 4 5 6 Number of Customers 1,093 784 450 250 100 50 25 Avg. Revenue/Customer $4.99 $5.75 $8.00 $6.25 $5.15 $4.50 $3.00
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