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English
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| Number of pages / Number of words: |
3 / 733 |
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Problem 8:
With contract( 12% annually
2,000,000*.12%= 240,000 customers (A)
Cost with contract to recover the churn:
240,000*$400= $96millions
Cost without contract to recover the churn:
1,040,000*$400= $416millions
Difference in cost between contract and without contract= $320 million(B)
MM= 60-30= $30
BE= 400/30= 13 months ( C)
D) To make contract, I would suggest making them for more than 13 months long...
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Another very important thing is that if you don’t apply contracts to your customers your churn % will be a lot higher and you will need to invest a lot more money to recover the same number of customers that will be: $416 millions, and the difference is that if you maintain your customers under contracts and longer than 13 months, you will have recover your investment and your churn % will be very low as well as your acquisition cost for the customers you have lost...
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