Question b!
Subscription pricing (100 points) m has been using a monthly plan of $5o for unlimited access. While the plan has been successful, the gym is considering offering n new annunl plan that targets new need to provide some advice on how they should go about setting a price for the annual plan After careful research, you found out that the kym spends S10 per customer for retaining existing customers, and given this investment, the average renewal rate for the monhy plan is 70% (regardless of how long a custoner has been with the gym) Suppose that 1. Customer acquisition cost (one-time) per customer is $40. 2. Monthly variable cost per customer is $10. 3. The gym plans on spending $10 per customer for retaining existing customers. 4. Monthly interest rate is 0.5%. (a) Based on the total period value and expected customer period value, compute the upper and lower-bound of the subscription price for the new annual plan. You might find the following tables useful for calculation. [80 points] Customer period value (CPV) for Monthly Subscription Sales (n) Month Price VC MKTG cost Profit Retention Discounting CPV 10 12 Total Net present valuve (NPV) of the Cont of Anmul Sueription (o Month MKTG COst Profit Retention Discounting C vc 10 Total (b) Discuss one factor that could allow the gym to charge a price higher than the lower- bound you found in part (a). [20 points Subscription pricing (100 points) m has been using a monthly plan of $5o for unlimited access. While the plan has been successful, the gym is considering offering n new annunl plan that targets new need to provide some advice on how they should go about setting a price for the annual plan After careful research, you found out that the kym spends S10 per customer for retaining existing customers, and given this investment, the average renewal rate for the monhy plan is 70% (regardless of how long a custoner has been with the gym) Suppose that 1. Customer acquisition cost (one-time) per customer is $40. 2. Monthly variable cost per customer is $10. 3. The gym plans on spending $10 per customer for retaining existing customers. 4. Monthly interest rate is 0.5%. (a) Based on the total period value and expected customer period value, compute the upper and lower-bound of the subscription price for the new annual plan. You might find the following tables useful for calculation. [80 points] Customer period value (CPV) for Monthly Subscription Sales (n) Month Price VC MKTG cost Profit Retention Discounting CPV 10 12 Total Net present valuve (NPV) of the Cont of Anmul Sueription (o Month MKTG COst Profit Retention Discounting C vc 10 Total (b) Discuss one factor that could allow the gym to charge a price higher than the lower- bound you found in part (a). [20 points
