XDirectTV: Maximizing Customer Acquisition with Prepaid Visa Card Offer

How can XDirectTV determine the maximum value of the prepaid Visa card they can offer to acquire a customer?

Based on the provided information, what factors should XDirectTV consider in calculating the maximum value of the prepaid Visa card?

Factors to Consider in Determining the Maximum Value of Prepaid Visa Card:

When determining the maximum value of the prepaid Visa card that XDirectTV can spend to acquire a customer, they need to consider the customer acquisition cost (CAC) and the lifetime value of a customer (LTV).

Customer Acquisition Cost (CAC): This includes all the costs associated with acquiring a new customer, such as marketing, sales, and promotional expenses. XDirectTV needs to calculate how much they are willing to invest to acquire a customer.

Lifetime Value of a Customer (LTV): LTV is the total revenue XDirectTV expects to generate from a customer throughout their relationship. It is essential to estimate how much profit a customer will bring over time to determine the maximum value of the prepaid Visa card.

Calculating Maximum Value: For example, if XDirectTV aims to break even on the CAC within 5 years and the annual profit per customer is $50, the LTV would be $250 ($50 x 5 years). Therefore, the maximum value of the prepaid Visa card they can offer may be based on this LTV calculation.

It's important to note that the provided data did not specify the revenue per customer, expected customer lifetime, or costs per customer, which are crucial in making an accurate determination. Without these specific details, it is challenging to pinpoint the exact maximum value of the prepaid Visa card.

While the choices provided in the initial information do not match the calculated value of $250, it is essential for XDirectTV to conduct a more in-depth analysis based on their specific business metrics to determine the most effective prepaid Visa card offer to attract customers from competitors like Comcast.