Question: Comcast is looking to convert Direct TV users to Comcast Cable. Brian Roberts, the chairman, remembers a case study that he did while getting his MBA at the Wharton School of the University of Pennsylvannia, where they used a mailing to great success. Mr. Roberts called a meeting with his top marketing and finance lieutenants and his advertising company to investigate the potential of this mailing initiative. They use the following facts to evaluate the idea of doing the mailing:
The average Comcast customer pays about $150 per month for cable TV and internet. Comcast estimates its direct and administrative costs to provide those services to average about 60% of the monthly revenue. Comcast's advertising agency will charge $25,000 to create the art for the mailing. Experion will provide a consumer mailing list with 1,500,000 homeowners in the greater Philadelphia market. List rental, printing, postage and mailing costs will be about $.92 per piece.
a) How many new customers would Comcast need to capture from the mailing to breakeven? Round answer to the nearest whole number.
b) What would the breakeven response rate be? Carry to two decimal places.