Improving the NPV of a National Remodel Program
The CompanyA top 5 US-based cellular provider
The ChallengeThe client had tried three different capital investment programs -- good, better, and best, each with increasing levels of upfront investments -- and wanted to understand in which locations to roll out each program.
The SolutionThe client used APT’s Test & Learn software to measure the incremental impact of each capital investment option. APT determined that, on average, the “best” full-scale remodel generated the largest revenue increase, followed by ”better;” the revenue impact of the “good” program was negligible.
While “best” generated the largest revenue increase, rolling it out to all locations would have been NPV negative over a five year period - only paying back in about 10% of locations - due to the extent of the upfront investment. Since it would not be profitable everywhere, APT determined where the “best” program was most profitable, identifying locations with positive demographic attributes (e.g., education level, competitive density) and targeting those locations. Moreover, despite the lowest upfront cost, APT recommended that the client not roll out the “good” program anywhere, as the investment’s incremental revenue impact was negligible.
Based on these drivers of performance, APT built a predictive model to determine which capital option would be most profitable in each location, allowing for investment prioritization that would increase near-term cash flows.