Question: Sprint is curious as to how much value each customer provides tothe firm. Management has estimated that it currently costs $5on average to acquire and

Sprint is curious as to how much value each customer provides tothe firm. Management has estimated that it currently costs $5on average to acquire and attract a new customer. Most customers sign up for the $79.99/month phone plan with a margin of$61.99. Past audits of the firm’s data suggests that most customers remain with Sprint for 7 years.

1. What is the CLV?

2. What if the salesperson upsells new customers to the premier plan of $99.99 per month with a cost of $20/month to the firm?

3. What happens to CLV if customer satisfaction decreases and retention drops to 2 years (the required time of the sales contract)?

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