Essay Home Alarm

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MARKETING ANALYTICS Home Alarm Case 1) What is the LTV (looking 8 years out) of a customer who used auto-pay? The Life time value of a customer who used auto-pay is $1670.69 (LTV net of acquisition costs= $1373.69) 2) 2)What is the LTV (looking 8 years out) of a customer who did not use auto-pay? The Life time value of a customer who did not use auto-pay is $1361.87 (LTV net of acquisition costs= $1064. 87) 3) What is the maximum amount that Home Alarm could spend on customer and salesperson incentives to convert a residential customer to auto-pay? The maximum amount that could be spent should be the difference between the Lifetime Value of customers that sign up for non-autopay service ($1064.87) and the LTV for the ones…show more content…
(Table 1) It could be worthwhile to offer just a reduction of the installation costs. For instance, offering a discount of 50% on the installation cost would increase the LTV of customers that choose autopay over non-autopay by more than $200 and would create a loss of only $97,5 per customer that would have opted for autopay without further incentive. Another strategy could be offering the new customers who opt for an automatic payment service a fixed price for the first three years (not increased by the annual 3% rate). In this case the LTV net of the acquisition costs would be $1305,5, still higher than the one the company would earn whether the customer opts for a not automatic payment. Moreover, offering 8 years of fixed price ($480) is still more profitable than the case in which the chose a not autopay method, but it is, in my opinion, not recommendable, because of the negative effect that it could have on the customer that chose this option before. Indeed they could decide to resign the contract and try to get a new one with the more convenient conditions. (Table 2) 5) What new pricing strategies and services should Home Alarm consider to convert existing customers to auto-pay? Taking in consideration the attrition rate during the past nine years, it seems to be more convenient try to convert the customers as early as possible; indeed
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