Understanding acquisitions costs, retention and churn rates 🧮
Nintendo has launched Nintendo Online membership program. The membership allows members to play additional retro Nintendo games, as well as store data. Subscribers are charged $10 per month and cost of maintaining this service is $2 per month per customer.
Nintendo expects the churn rate for this service to be 3%.
What is the maximum acquisition cost per customer?
Nintendo has a four-year time horizon for this new project so that the success of this project will be evaluated over a 4-year time period. Time value of money is not important and can be ignored.