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MovieNet, a competitor to Netflix, charges $12 a month for a subscription. Their variable costs per customer are $4.95. They spend $3.93 per year on
MovieNet, a competitor to Netflix, charges $12 a month for a subscription. Their variable costs per customer are $4.95. They spend $3.93 per year on marketing per customer. The current attrition rate is 4.7% per month. Their monthly discount rate is 3%. 1. What is their retention rate? 2. What is their CLV? 3. If they increased their marketing spending to $4.10 per customer, what would this CLV be? 4. Assuming that the your answer for #3 is lower than that for #2, is there any plausible reason why they would want to increase their marketing spending, and thus lower their CLV? 5. Going back to the original numbers, which would generate a better CLV? An increase in price by $1 or a decrease in attrition rate by 0.5%
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