Reference no: EM132908764
Bouygues Telecom (BT) is a mobile phone service provider based in Nepal that provides several value added services such as mobile data, video mail etc. The market is highly competitive due to the presence of several mobile companies from China. The customers of BT are categorized in to different states as listed below.
State 1 Customer churn that generated no revenue/profit
State 2 Customer churn that generated Nepali Rupee (NR) 200 profit per month on average (customer uses the service only for incoming calls)
State 3 Customer state that generated NR 300 profit per month on average
State 4 Customer state that generated NR 400 profit per month on average
State 5 Customer state that generated NR 600 profit per month on average
State 6 Customer state that generated NR 800 profit per month on average
The transitions between different states are shown in Table 4.1:
1 2 3 4 5 6
1 1 0 0 0 0 0
2 0 1 0 0 0 0
3 0.05 0.05 0.90 0 0 0
4 0.10 0.05 0 0.80 0.05 0
5 0.20 0.10 0 0.05 0.60 0.05
6 0.10 0.20 0 0 0 0.70
4.1 Customer in which state has the longest expected life (that is longest life before churn to either of the churn states).
4.2 If a customer is in state 6, calculate the probability of eventual absorption in state 2?
4.3 Round off the expected duration obtained in question 4.1 to the nearest integer and calculate the expected value of the customer lifetime value of the customers in state 6 using all the information that you have from questions 4.1 and 4.2 Use a discount factor of 0.99.
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