4 ms·
T = turnover per client per month E = variable expense per client per month A = Average lifetime of a customer in months P = Percent of students that turn in
by mixmax 18y ago
T = turnover per client per month
E = variable expense per client per month
A = Average lifetime of a customer in months
P = Percent of students that turn into paying customers
As = Average lifetime of a student account before it is either terminated (graduated) or turned into a paying account
The lifetime value of a customer is (T-E)xA
The cost of a student account is ExAs
The acquisition cost of one customer that has previously been a student is ExAs/P
if ExAs/P < (T-E)xA then you should do it.
Stick the numbers into an excel sheet and play around with the basic assumptions. Chances are that your answer will be obvious.
Note I had to use x for multiplication since the character normally used for this is used for markup :-(
- boucher 18y agoAgree that you should try to figure out what doing so would actually cost, and what you might hope to gain from the situation. Of course, if the costs are expected to be relatively low (which I would imagine, given that it isn't likely to be a large % of your users), even if the expected value is zero, you should consider the goodwill and potential long term benefits you might gain. Plus, you can always try giving out free student accounts, and then if it becomes too expensive, stop. You might even consider a manual approval process, just to make it enough effort that most people won't bother unless they really want it.
- mixmax 18y agoThere are of course many factors you could include. If you do an excel sheet it is pretty trivial to include all sorts of numbers. The advantage of this approach is that instead of just guessing you'll be naking an informed decision based on an assessment of the underlying assumptions. In my opinion this is hugely superior to just guessing.
- ScottWhigham 18y agoCan you explain "turnover per client per month"?
- mixmax 18y agoIt's simply what a customer is paying you each month.