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Customers and growth: the economics of marketing

Cut churn or buy more customers?

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The prompt

The fictional meal kit company wins 10,000 new customers a month and loses 8 percent of its customers each month. Each customer brings SGD 36 of contribution a month. Option A: a better first month (free menu changes, a call from a chef) cuts churn to 6 percent and costs SGD 200,000 a month. Option B: more advertising raises new customers by 25 percent at a cost of SGD 150 for each extra customer. Which option earns more once the customer base settles? (Assume churn stays steady.)

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