Subscription Model Viability for POS Systems

As a data scientist at Smart Sales Incorporated, a company that specializes in point-of-sale (POS) systems, you are tasked with evaluating a potential shift from a one-time purchase model to a subscription-based model. Currently, POS systems are sold for a one-time price of $5,000 per unit, yielding a profit margin of $2,500 per unit (50%). The proposed subscription model involves an initial one-time fee of $300 for the first month, followed by a monthly subscription fee of $100. If customers continue their subscription, the initial fee is waived, and the subscription cost remains $100 monthly. For this analysis, we'll focus exclusively on financial metrics and exclude servicing costs, which are billed separately from subscription fees. Additionally, assume that the lifespan of a POS system is approximately six years. Questions: 1. What retention rate does Smart Sales Incorporated need to achieve during a two-year contract period to match the profitability of the traditional one-time sale model? 2. If the company doesn't reach break-even within the initial two years, what retention rate is necessary to break even over the subsequent four years? And what about over the entire six-year lifespan? Assume that costs are identical for both subscription and one-time sales.