In a recently published study, a telecommunications company tested four win-back

Question

In a recently published study, a telecommunications company tested four win-back offers with 40,000 customers, looking not only at which offer lured back the most customers, but also at which one was the most profitable. The results were as follows:

Strategy

Per-Person Cost

Success rate

ROI

DISCOUNT OFFER: $20 off for 6 months

$120

45%

668%

UPGRADE OFFER: A $35 movie channel free for 3 months

$105

41%

793%

BUNDLED OFFER: $20 off for 6 months, plus a $35 movie channel free for 3 months

$225

47%

302%

TAILORED OFFER: Customers who left over price get the discount

$120

45%

596%

Customers who left over service get the upgrade

$105

a) Based on the above results, discuss the implications with respect to the best way to retain customers?

Strategy

Per-Person Cost

Success rate

ROI

DISCOUNT OFFER: $20 off for 6 months

$120

45%

668%

UPGRADE OFFER: A $35 movie channel free for 3 months

$105

41%

793%

BUNDLED OFFER: $20 off for 6 months, plus a $35 movie channel free for 3 months

$225

47%

302%

TAILORED OFFER: Customers who left over price get the discount

$120

45%

596%

Customers who left over service get the upgrade

$105

Explanation / Answer

The best way to retain the customers is to go with the "BUNDLED OFFER: $20 off for 6 months, plus a $35 movie channel free for 3 months" as this has the highest success rate or hit rate of 47% among all the other options.

However, the implication is that the business gets the lowest return on investment among the all of them. Hence this strategy is good for customers and bad for investors.

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