20 Aug FamilyTree.com is a subscription-based website that allows consumers to conduct genealogical research.
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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