MA.8:5 - Archetypal Grounding

MA.8:5.1 - Keep acquisition and cohort continuation distinct

A constructed subscription cohort acquires 100 customers at 20 each, paid initially: 2,000. The scenario assumes 80% renewal into each next month, and 10 of receipt less relevant service payments per active customer per month. Its three-month account is:

The three-month service total is 2,440, leaving 440 after acquisition spending on this undiscounted basis. These are conditional flows, with no other changing flows under the supplied scenario. This account omits flows after month 3.

Before month 2, the original acquisition payment is already spent. Count the original 2,000 once in the cumulative account. Compare continuation with stopping using the future flows that change and the applicable obligations.

Suppose a proposed new cohort costs 35 per customer to acquire, contributes only 6 per active customer per month and has a supplied 60% monthly renewal scenario. Its corresponding three-month service flow is 600 + 360 + 216 = 1,176 against 3,500 acquisition, leaving −2,324 on the same limited basis. Copying the earlier cohort’s ratio would conceal the changed expansion conditions.

MA.8:5.2 - Carry a product through sales and later obligations

A product can require a different model. Suppose an already sold product carries a supplied obligation to provide a service module in year 2 at an expected resource cost of 400. Include that later requirement even if current unit margin omits it. Stopping new sales does not by itself cancel the supplied obligation. Use Financial Domain Modeling (FDM), FDM.1 and FDM.3 to recover an unclear obligation or its required events, and FDM.4 to establish what an actual change did to it.

Extend that product into a complete constructed account. Development of 1,200 was paid before year 1. One hundred units sold in year 1 for 3,000, all received, with production payments of 1,600 in that year. The supplied service obligation requires payment of 400 in year 2 and closure requires 200 in year 3. Assume those amounts cover the relevant flows, with no other taxes, financing or resource payments in this teaching case.

The sales-period production margin of 1,400 therefore coexists with a whole undiscounted total of −400. This table is a payment account under the supplied premises. Applicable recognition rules can place expenses differently; MA.4 supplies the reporting comparison. Neither a margin nor the timing table alone determines the appropriate product decision.

Now stand at the end of year 1. The development and production payments, and the original sales receipts, are history. The existing 400 service and 200 closure remain payable under both futures. A feasible additional sixty-unit option would receive 1,800 later in year 2, pay 960 for production at the start of year 2 and create 240 of further service payments in year 3. Assume adequate supplied capacity and unchanged old obligations.

The additional option changes the future account by 1,800 − 960 − 240 = 600. Without it, the remaining old obligations produce net future flow of −600; with it, total future flow over years 2–3 is zero. The favorable difference does not erase either obligation. Nor does it settle liquidity: production is paid before the new receipts, so the whole account by payment date is needed.

An alternative design requires another 300 before that production and reduces the new service payment from 240 to 120 in year 3. Against the original additional-sales option, it changes this limited undiscounted account by −300 + (240 − 120) = −180. Any further claim for quality, revenue or risk reduction needs its own supported consequence. A lower later service cost alone does not make the whole alternative better.

Changing the payment date returns to the timed account. Changing an obligation returns to FDM; changing the required work or capacity returns to MA.1–2 and the operating decision. The historical account remains useful for understanding the product’s full result while the current comparison uses what the choice can still change.