On average velo mobile spends 1000 to acquire a new, Ask an Expert

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On average, Velo Mobile spends $1,000 to acquire a new customer. Customers can buy one of three different packages, outlined as follows:

Super Premium Package - $80/month

Premium Package - $60/ month

Basic Package - $40 / month

Each year, Velo Mobile spends $30 in maintenance and $50 in billing to serivce each customer account.

20% of Velo Mobile's customers purchase the Super Premium Package; 40% purchase the Premium Package; and 40% purchase the Basic Package. Over time, 75% of customers remain with the company from one year to the next.

1 - What is the lifetime value of a Super Premium customer?

2 - What is the lifetime value of an average customer?

3 - If the company currently has 1,000,000, what is the maximum amount of money it should be willing to spend to improve its customer retention rate from 75% to 85%?

4 - Assess the customer acquisition cost. Is this a reasonable amount to spend to acquire a customer in each of the segments? Why or why not?

Use 10% as the discount rate

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92345149

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