The Value of Call Monitoring Comcast's call center had a problem ...

[EY67]

The Value of Call Monitoring Comcast's call center had a problem with unresolved incidents. Customers who called in for technical help often had to make follow-up calls because the first recommended solution did not work. Since the call center staff were expected to handle an average of 10 calls per hour, Comcast suspected that calls were being terminated before the complaint had been resolved. As a possible solution, they hired supervisors to randomly listen into calls so as to better monitor inappropriate call terminations at a cost of 8,000 per month. This cut down the need for follow-up calls and, more importantly, increased customer retention. The number of customers who called in a complaint and would terminate services within three months was cut from 150 to 130 . How large must the present value of a retained customer's contribution margin be for additional monitoring to be profitable?

Question 2

A firm currently has 5 workers each paid 15 per hour. If it decides to hire a 6th worker, the hourly wage increases to 18 for all workers. The 6th worker is expected to contribute to around 40 worth of output. Based on this information, the firm should
 a. Hire the 6th worker since MR>MC
  b. Not hire the 6th worker since MR>MC
  c. Not hire the workers since MR  d. Need more information

[ju]

Answer to Question 1

Comcast retained an additional 20 customers at a cost of 8,000 or it cost them 400 per customer retained. So long as the present value of the contribution that a typical customer represents over a typical time horizon exceeds 400, the monitoring is profitable.

Answer to Question 2

a

[EY67]

Thanks for the timely response, appreciate it

[Joy Chen]

Gracias!