Section 3: This exercise is on CLV analysis. Marks: 20 The New York Times Company (NYT) wishes to re-energize their non-institutional on-line subscription market in the ASEAN region. The Commercial Director for the region needs to estimate how much the firm should spend on acquisition cost this year (Year 0) to acquire new subscribers next year (Year 1). Based on historical data, the annual churn rates are given in the following table: Year 2 - 50% Year 3 - 30% Year 4 - 40% Year 5 - 50% Their best subscription package currently is US$0.99 per week for 52 weeks. The annual amount should be paid by the subscriber once a year. Given the intense competition, they do not foresee any possibility of increasing the subscription fee over the next five to six years. However, this year they spent US$0.25 per week per subscriber to maintain the relationship. Churning takes place despite such CRM activities. NYT expects the inflation to be 5% per year on their cost. The potential number of people who could be targeted for acquisition in the region is 20 million individuals. In 'Year 1', NYT expects to acquire around 1% of this potential market as new subscribers for the subscription package mentioned in the previous paragraph. The Commercial Director wishes to estimate how much fund they should allocate as acquisition cost in 'Year O' for new customers to be acquired for 'Year 1' subscription, so that the CLV is 0. Assume that the interest rate is 8% for all years, and that the horizon is 5 years. Please fill out the shaded cells in the table in the following page. PLEASE DO THE CALCULATIONS BASED ON AGGREGATE AMOUNTS (not per person). Marks (0.5 mark per cell x 3 cells) = 19+ (1 mark free) = 20 marks Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 2 I w Potential subscriber base Expected new subsriber in Year 1 Acquisition cost per subscriber Projected revenue Projected cost of servicing Projected net contribution Cumulative retention rate Expected net contribution