Symantec sells computer antivirus and Internet security products to consumers. Consider the Norton Internet Security product, with a list price of $69.99 sold through the retail channel. Assume that packaging and delivering Norton Internet Security to the retail channel costs $7 per unit. Furthermore, assume that annual renewals of Norton Internet Security are sold directly by Symantec through its online store as a digital download at no cost to Symantec. Outside of retail channel costs, assume that Symantec spends on average $6 per customer on sales and marketing for acquiring new customers and $1.20 per customer on sales and marketing for retaining existing customers. Let the annual discount rate used by Symantec be 12 percent and assume that a customer acquired through the retail channel must be reacquired every four years as he or she gets a new computer.

a. From this information, what is the variable cost for Norton Internet Security for the first sale? For subsequent sales?

b. If the retail channel requires 50 percent of the retail list price to stock Norton Internet Security, what are Symantec’s total customer acquisition costs for a retail Norton Internet Security customer?

c. What is the profitability of a new Norton Internet Security retail customer for Symantec?

d. If direct digital downloads of annual upgrades are discounted by $20 from the retail list price, what is the effective annual renewal price of Norton Internet Security?

e. What is the profitability of a renewing Norton Internet Security customer for Symantec?

f. If the retention rate is 90 percent, what is the four-year value of a Norton Internet Security customer acquired through the retail channel?

g. If the retention rate is 75 percent, what is the four-year value of a Norton Internet Security customer acquired through the retail channel?

h. If the retention rate is 50 percent, what is the four-year value of a Norton Internet Security customer acquired through the retail channel?