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Playing Games Mr . Ford is a mobile game developer. He's developed a new game called MyPet whereby customers raise their virtual pets on their
Playing Games
Mr Ford is a mobile game developer. He's developed a new game called MyPet whereby
customers raise their virtual pets on their phones. He will not charge customers to
download MyPet but he will charge for "addons" they can purchase in order to make their
pets happier eg snacks, toys
He decides to acquire customers by running a Facebook campaign. The campaign will
serve ads to Facebook users who have shown interest in mobile games. That is these users
will be exposed to Mr Ford's ad They then can click through on the ad and download the
game. The campaign cost $ per thousand ads served exposures or "impressions"
This is called a $ costPlaying Games
Mr Ford is a mobile game developer. He's developed a new game called MyPet whereby
customers raise their virtual pets on their phones. He will not charge customers to
download MyPet but he will charge for "addons" they can purchase in order to make their
pets happier eg snacks, toys
He decides to acquire customers by running a Facebook campaign. The campaign will
serve ads to Facebook users who have shown interest in mobile games. That is these users
will be exposed to Mr Ford's ad They then can click through on the ad and download the
game. The campaign cost $ per thousand ads served exposures or "impressions"
This is called a $ costperthousand.
Mr Ford runs this campaign. It generates exposures and users download the
game, thus becoming acquired customers. Mr Ford finds they generate $ per month in
addon profits. He also finds he retains of these customers per month measured by
whether customers continued to play the game He monitors these numbers for several
months and verifies that the $ and are constant over time.
Assume Mr Ford uses a annual discount rate for valuing the long term.
a What is the lifetime value of a customer for the Facebook campaign? HINT: Profit
contribution and retention rate are constant over time. This makes your calculation easier!
b What is the return on investment ROI of the campaign ROI
c Mr Ford is thinking of reducing the prices of his addons. He assumes that users will
therefore purchase more addons, but because of the price reduction, profit contribution
from addons will slip from $ per month to $ However, he believes retention rate will
increase to per month. Assume again these numbers will stay constant over time.
Also assume that the impressions, the $ costperthousand, and the users
downloading per impressions remain the same as in part a
Will Mr Ford be better off with his new plan or should he stick with the old plan? Justify
your answer.perthousand.
Mr Ford runs this campaign. It generates exposures and users download the
game, thus becoming acquired customers. Mr Ford finds they generate $ per month in
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