Choosing well the segments to focus on for acquiring custome…
Choosing well the segments to focus on for acquiring customers has a profound and long-lasting effect on growth and success. Which segment can you most easily make the financial case for pursuing, if segment A and segment B can be described simplistically as follows:Average number of hours of sales efforts per acquired customer for segment’s A and B are 10 and 40, respectively, where the hourly cost of such efforts is $300. The initial purchase yields contribution profits of $1000 and $4000, respectively, for segments A and B, followed by recurring, monthly contribution profits of $300 and $600 thereafter. Segment A’s monthly churn rate is .04, compared to B’s .025. For simplicity assume the cost of capital is zero.
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