ECO342H1 Lecture Notes - Lecture 2: Retention Rate, Churn Rate, Profit Margin
Document Summary
Part 1: virgin mobile: monthly churn rate = 2% with contracts. Therefore monthly retention rate = 100-2 = 98% Annual retention rate = 98% of starting population * 98% of population remaining after first month etc for 12 months = 98%^(12) = 78. 5% annual retention rate: repeat same process as in a): Annual retention rate = 94%^12 = 47. 6%: beginning customer base of at&t = 20. 5m. With 78. 5% retention rate using contracts, the customer base at the end of the year will be. We need to figure out the x number of customers at&t must have at the beginning of the year for them to keep the same number of customers at the end of the year, in a model without contracts. Let x represent the number of customers at the start of the year in this case: The difference between 33. 8m and 20. 5m is 13. 3m customers, therefore at&t will need 13. 3 million customers at the beginning of the year.
