Verizon spends an average of $400 to acquire a customer. Annual maintenance cost

ID: 2381925 • Letter: V

Question

Verizon spends an average of $400 to acquire a customer.

Annual maintenance costs is $35/customer.

Record-keeping and billing costs are $30 per customer per annum.

The price of a basic service is $20 per month.

30% of customers buy an upgrade package at $40 per month

10% buy the unlimited package at $70 per month.

Over time, 70% of customers remain with the company from 1 year to the next.

Please show calculations:

a) What is the lifetime value of an average customer?

b) What is the lifetime value of of the unlimited customer?

a) lets convery to years$20*12 = $240

$240 - $35 - $30 = $175 per year

average lifetime $ 175* n - $400 =0

n=2.28year=27.36 months

b) lets convery to years$70*12 = $840

$840 - $35 - $30 = $775 per year

average lifetime times yearly profit minus aquisition cost

$775 * n - $400 =0

n=0.5161year=6.19 months

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