Business Brief 4

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Apr 24, 2024

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P a g e | 1 To: Scott Murray From: Ahmad Jaradat Subject: ECON 723 – Business Brief 4 Date: 03/12/2024

P a g e | 2 Spectrum – The Spawn of Time Warner Cable and Charter Communications: Memo 5 Time Warner Cable and Charter Communications combined. Rebranded as Spectrum. The cable TV sector is grappling with competition brought on by progress. Spectrum has been experiencing a loss of subscribers as indicated by the marketing research findings. The drop in VoIP telephone usage can be attributed to the popularity of cell phone packages. Many individuals find it financially challenging to keep both a landline and a mobile plan, leading them to opt for services. The ease and benefits offered by wireless and high-speed data plans have become increasingly appealing to consumers. Over time, mobile wireless plans have transitioned from a luxury to a necessity. (Baye & Prince, 2022). The residential phone service provider is considering introducing targeted discounts to improve customer retention rates. They have tasked the marketing team with evaluating the benefits of discounts for the company. The proposal involves offering customers looking to cancel their home phone services a discount of 25 to 30 percent on their rates provided they commit to keeping the service for least three months before receiving the discount. This analysis will explore whether this strategy can boost the company’s gains and assess any risks that could impact profitability if the plan is put into action. Economic Profits Introducing the targeted discount strategy is expected to boost the company’s profits. Customers will be given a discount of 25 to 30 percent off the price aiming to encourage customer retention. Offering a discount can motivate customers to stay with the service. Some customers were discontinuing their services due to difficulties in affording both a landline and a mobile plan. The targeted discount approach is set to customers’ costs. Additionally, customers are required to maintain their services for three months before becoming eligible for the discount. Customer loyalty boosts a company’s gains, in the term resulting in increased profits, over the following three months. (Baye & Prince, 2022) It would be more cost-efficient for the company to retain current customers than to market to new customers. Company Risks The company may face risks in the future due to the implementation of the discounting strategy. (Baye & Prince, 2022) One concern for the company could be engaging in price discrimination, where different prices are set for the service to keep customers loyal. (Baye & Prince, 2022) Over time customers who were not initially considering canceling

P a g e | 3 their home phone services may become aware of the discounted prices offered to customers. This could lead them to either try to cancel their services to take advantage of the discount or decide to switch to our competitors. In any case this situation is likely to reduce our profits and have an impact on the company’s overall revenue. Economists have found that when companies engage in price discrimination it can cause inefficiencies, in the market, for both buyers and sellers. (Twin, 2022) Conclusion In conclusion, the specific discount strategy is expected to boost the company’s profits. By implementing this plan, the company can keep its customer base intact while also helping customers save money. Initially maintaining customer loyalty will lead to increased profits, over the three months. Nonetheless in the term pricing variations could pose a threat to the company’s revenue.

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P a g e | 4 Reference: Baye, M. R., & Prince, J. (2022). Managerial Economics and Business Strategy. McGraw- Hill Irwin, 2022 Connect Smart book edition. Twin, A. (2022, June 13). What Is Price Discrimination, and How Does It Work?. Retrieved from: https://www.investopedia.com/terms/p/price_discrimination.asp

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