Question: FamilyTree.com is a subscription-based website that allows consumers to conduct genealogical research. There are three levels of subscriptions, Basic, Premier and Ultra. The company spends
- FamilyTree.com is a subscription-based website that allows consumers to conduct genealogical research. There are three levels of subscriptions, Basic, Premier and Ultra. The company spends approximately $4 per customer on acquisition marketing, and all customers receive their first month as a free trial. Monthly prices, variable costs and retention rates are provided below.
| Membership Level | Monthly price | Variable cost | Monthly retention rate |
| Basic | $3.99 | $1.50 | 60% |
| Premier | $4.99 | $1.75 | 15% |
| Ultra | $6.99 | $2.50 | 25% |
- Calculate the customer lifetime value for each level of membership, using a monthly discount rate of .01.
- Based on these numbers, what are your recommendations regarding the marketing of the various membership levels? If you could increase the retention rate of the premier membership level by 30% for a $0.50 increase in variable costs how would this influence your answer?
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