Verizon Wireless currently has three schemes for payment. 1. check/cash 2. credit card 3. direct withdrawal.
The company executives know that customers are quite loyal to their current method of payment. An incentive is to be offered by Verizon that would reduce you cell phone by $9.99 per month is you set up your account for direct withdrawal from a checking account. Market research suggests that with the incentive, 80% of customers who customers who currently pay by check or cash will continue to pay by that method for the next month, but 10% will switch to credit card payments and 10% will switch to direct withdrawal from checking.
Similarly, for those who currently pay by credit card, 75% will continue to pay that way each month, but 10% will switch to cash or check, and the rest will switch to ACH.
Finally, those who use ACH, 90% will stay with that method, while 5% will switch to CC or cash.
If 59% currently pay by check, 31% by CC and the rest use ACH, how will these values have changed after two months?
Do the projections indicate that the $9.99/mo incentive offer will achieve anything long-term?
Show: Transition Diagram
Transition Matrix
Show work and explain answers