Should marketer spend additional to reduce attrition rate

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Reference no: EM133597067

Question: A marketer of a medication is willing to invest in the acquisition of new patients. What would be the upper limit of this investment per patient assuming the follow retention/attrition rate and assumptions?

Should the marketer spend an additional $2.00 per month to reduce the attrition rate by 2% per month (e.g., 95.10 instead of 93.10 or 89.40 instead of 87.40 in the first two months)?

Assumptions:
1. Revenue per patient per month=$250
2. Medications are paid for at the end of the month
3. Internal rate of return of 12% compounded monthly.

Retention rate for a typical cohort

Month	Retention
Month 0	100.00
Month 1	93.10
Month 2	87.40
Month 3	82.82
Month 4	79.32
Month 5	77.29
Month 6	75.30
Month 7	73.36
Month 8	71.46
Month 9	69.70
Month 10	67.98
Month 11	65.50
Month 12	63.95

Reference no: EM133597067

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