Wireless service carriers typically pay large subsidies to acquire customers. This results in <\/p>
industry wideaverage acquisition costs of $310. Industry figures suggest the average carrier earns $55 per month in revenues. Margins in the industry average 30%. Although some carriers have offered plans without contracts, post-paid plans with contracts have been the norm in the industry. Contracts tend to extendthe life of a customer. On average, the expected lifeof a customer under the contract model is 4 years. Without a contract, the expected life drops by 50%(HINT: In the reading on customer management and the notes we explored the relationship between expected life and retention rate)Recently, TMobile has begun advertising no annual service contracts.<\/p>
<\/p>
a)Under the current industry economics(i.e. assuming costs, revenues, and margins are unchanged) , what is the effect of eliminating contracts on the net lifetime value of a customer (assuming an annual discount rate of 10%)?<\/p>
<\/p>
b)What advice would you give TMobile as they transition to no contracts?<\/p>", "transcribed_text": "", "related_book": { "title": "Income Tax Fundamentals 2013", "isbn": "1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516", "edition": "31st Edition", "authors": "Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/1124.jpg", "uri": "\/textbooks\/income-tax-fundamentals-2013-31st-edition-9781285586618", "see_more_uri": "" }, "free_related_book": { "isbn": "B0CVNJ1247", "uri": "\/textbooks\/carbomer-homopolymer-type-b-drug-excipient-business-development-opportunity-report-2024-unlock-market-trends-target-client-companies-and-drug-business-development-opportunity-reports-1st-edition-979-8879514742-262976", "name": "Carbomer Homopolymer Type B Drug Excipient Business Development Opportunity Report 2024 Unlock Market Trends Target Client Companies And Drug Business Development Opportunity Reports", "edition": "1st Edition" }, "question_posted": "2024-06-28 04:36:47", "see_more_questions_link": "\/study-help\/questions\/business-economics-2023-September-08", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/refer-to-the-annual-report-of-campbell-soup-company-in", "description": "Refer to the annual report of Campbell Soup Company in Appendix A. 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