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

ID: 2381926 • 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?

We have some monthly and some yearly so lets convery to years$20*12 = $240

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

average lifetime times yearly profit minus aquisition cost

$ 175* n - $400 =0

n=2.28year=27.36 months

We have some monthly and some yearly so lets convery to years$70*12 = $840

$840 - $400 - $35 - $30 = no, this won't work, the $400 is a one time cost

$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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