answer questions & fill in grey areas

Bloom Telecommunications Basic $40/mo 50% buy the basic service package 1 million customers Customers can buy into three different plans Assumptions 50% contribution margin 75% retention rate 10% cost of capital Premium $65/mo 30% of customers buy a premium package $840 CTA (cost to acquire) Superpremium $100/mo 20% add high spee plans 11 Questions 1. Using the multiplier method, what is the lifetime value of: 1. Super-premium customer? 2. Premium customer? 3. Regular customer? 4. Average customer? 2. What do you think of the company's CTA target? 3. Bloom is considering investing in an infrastructure improvement that, it believes, will improve its customer retention rate from 75% to 85%. What is the maximum the company should investa Assumptions $ $ Number of customers Acquisition cost Contribution margin % Discount rate (i) 1,000,000 840 50% 10% Retention rates 1. Start here -> Calc multipliers Margin multiplier = 1/(1+i-r) 75% 85% CLY Estimates Elasic Premium Superpremium Average 2. Cal Number of customers % of market 50% 30% 20% $ 40 $ 65 3. Calc CM per customer in Dollars Price/month Annual revenue/customer $ 100 Contribution margin/customer 4. Calc CLV Current 75% Margin multiplier CLV MargintMargin Multiplier Current CLV/customer CV Marin Margin Multiplier Current CLV/customer 5. Calc CV after upgrade New 85% marin multiplier CLV.Margint Maren Multiplier New CLV/customer 6. Calc Cash Value of the improved Retention Rate New CLV/customer Minus Current CLV/customer Equals Improvement in CV/customer Multiply by Total number of customers Equals Improvement in CV among all customers