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Why Contracts

Why Contracts

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Published by Ankit Goel

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Published by: Ankit Goel on Jul 03, 2012
Copyright:Attribution Non-commercial


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Why contracts?Annual churn rate with contracts: 2 % * 12months = 24%Annual churn rate without contract : 6 % *12 = 72 %The difference is 48%For AT & T with a customer base of approx20.5 million, this would mean that it wouldhave to acquire anadditional of 9.84 millioncustomers at the cost of 3.64 billion tooffset customers lost to the higherchurnrate. ____________________________________________________________________________________Additional customers lost o churn : 48 % *20.5 million = 9.84 m customersAcquisition cost per customer $ 370 percustomerTotal cost of offsetting higher churn rate: $370 * 9.84m = 3.64 billionHence a strong reason to hold customers through contracts regardledd of the customer dissatisfaction. ____________________________________________________________________________________Pricing levelsBreak even analysis

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