AEM 4160: Strategic Pricing Prof.: Jura Liaukonyte Virgin CeLL CASE: EXCERCISES. Pricing Structure from the Carrier Perspective. Contracts: Annual churn rate WITH contracts =2% * 12 months = 24% (p.8) Annual churn rate WITHOUT contracts =6% * 12 months = 72% (p.8)
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Take AT&T example: customer base = 20.5 million
If AT&T abandons the contract based plan how many new customers would it need to acquire to offset customers from an increased churn rate?
Not surprising that major players still continue to hold the contracts.
= $370/ $22= 17 months
M = margin the customer generates in a year
r = annual retention rate = (1-12*monthly churn rate)
i = interest rate (assume 5%)
AC = acquisition cost
p > 0.07