answer questions & fill in grey areas

Bloom Telecommunications Basic $40/mo 50% buy the basic service package 1 million customers Customers can buy into three different plans Assumptions 50% contribution margin 75% retention rate 10% cost of capital Premium $65/mo 30% of customers buy a premium package $840 CTA (cost to acquire) Superpremium $100/mo 20% add high spee plans 11 Questions 1. Using the multiplier method, what is the lifetime value of: 1. Super-premium customer? 2. Premium customer? 3. Regular customer? 4. Average customer? 2. What do you think of the company's CTA target? 3. Bloom is considering investing in an infrastructure improvement that, it believes, will improve its customer retention rate from 75% to 85%. What is the maximum the company should invest? Assumptions 1,000,000 840 $ Number of customers Acquisition cost Contribution margin % Discount rate (1) 50% 1096 Retention rates 1. Start here -> Calc multipliers Margin multiplier = r/(1+i-r) 75% 85% CLV Estimates flaske Premium Superpremium Average Total 2. Cale Number of customers W of market 50% 30% 20% 100% S 40 3. Calc CM per customer, in Dollars Price/month Annual revenue/customer $ 65 S 100 Contribution margin/customer 4.Calc CLV Current 75% Margin multiplier CLV=Margin Margin Multiplier Current CLV/customer 5. Cak IV ter were New multiplier CLV.Mann Margin Multiplier New CV/customer 6. Cal Cash Value of the improved Retention Rate New CLV/Customer Minus Current CV/customer Equals improvement in CV/customer Multiply by Total number of customers Equals Improvement in Clarong all customers Improvement in all customer timest