Magzter Inc.
Magzter, the world's largest digital newsstand, has over 12,000 magazines that can be read anytime and anywhere online. They have an impressive 75 million subscribers worldwide. In Canada, there are 400,000 subscribers who buy the premium package for $90 per year. Ginny Brown, the VP Marketing for Canada, was concerned about the high attrition rate of these Canadian subscribers.
To address this, she developed a retention program with a cost per retained customer of $10 in YEAR 1, $10 in YEAR 2, and $10 in YEAR 3.
Because she was a disciplined marketer, she tested this retention program with 20,000 new customers and set aside an additional 10,000 customers as a control group. The retention rates for the control group and the test group are provided in the tables below. Complete both tables below and calculate the Average LTV per customer for the control group as well as the test group.
The discount rates to be applied are:
	Control	Test	Note: The discount rates for the Test are higher than the Control because of the higher risk associated with the Test program.
Year 1:	1.00	1.00
Year 2:	1.05	1.07
Year 3:	1.10	1.14
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QUESTIONS
1. Please complete TABLE I and TABLE II below to determine the average LTV per customer.
2. Complete TABLE III. Based on these results, should Ginny:
(a) Roll the program out to all 400,000 subscribers.
(b) Decide not to roll out the program
(c) Other (please provide details)
3. Based on your recommendation, what would be the total NPV if this program was rolled out to all 400,000 customers?
Please follow the same approach for calculating retained subscribers as we did in class. i.e. - The number of subscribers in Year 2 is equal to the number of subscribers in Year 1 times the retention rate that appears below the number of subscribers in Year 1.

TABLET 22 CONTROL 23 Year 1 Year 2 Year 3 24 Subscribers 10,000 25 Retention Rate 30% 34% 36% 26 Subscription Revenue 27 28 Variable Costs (%) 85% 85% 85% 29 Variable Costs ($) 30 31 Profit 32 Discount rate 1.00 1.07 1.14 33 NPV Profit 34 Cum NPV 35 Average LTV per customer 36 37 38 TABLE II 39 TEST 40 Year 1 Year 2 Year 3 41 Subscribers 20,000 42 Retention Rate 60% 65% 70% 43 Subscription Revenue 44 45 Variable Costs (%) 85% 85% 85% 46 Variable Costs ($) 47 Total Retention cost 48 Total Costs 49 50 Profit 51 Discount rate 1.00 1.07 1.14 52 NPV Profit 53 Cum NPV 54 Average LTV per customer 55 56 57 TABLE III 58 Average Cumulative LTV per customer 59 Year 1 Year 2 Year 3 60 Test 61 Control Increase in Avg LTV per 62 customer 63 64 Total increase in Customer LTV after 3 years 65 Total increase in Customer LTV after 2 years 66 67