Calculate break-even new customers for 30% discount
Company: Capital One
Role: Data Scientist
Category: Statistics & Math
Difficulty: medium
Interview Round: Technical Screen
Assume: C1 has 2,000,000 active cardholders; currently 5% use Rent‑a‑Home (RH) annually. Average RH spend per RH user per year is $500. A proposed promo gives 30% off RH spend, fully funded by C1. Average first‑year net revenue per new cardholder (after non‑RH rewards, servicing, and expected credit loss) is $550. Ignore interchange on RH transactions for simplicity. Let x be the number of new customers acquired because of the promo. a) Write the break‑even equation where incremental revenue from new customers equals promo cost across existing RH users plus new RH users, then solve for x. b) Express x as a percentage of the 2,000,000 base and discuss whether this target is realistic given typical acquisition funnels and approval rates. Show your work and final numbers.
Quick Answer: This question evaluates break-even and unit-economics analysis for a customer-acquisition promotion, testing competency in setting up algebraic expressions, interpreting business metrics like usage rates and incremental net revenue, and basic financial modeling within the Statistics & Math domain.
