Abstract

Attrition analysis has been accepted by the valuation profession as a simple method to establish customer population life characteristics when informational limitations preclude the use of the retirement rate method. Many customer account populations are assumed to be homogeneous whereby individual accounts possess similar characteristics with regard to size and life characteristics. However, customer populations are frequently composed of large and small accounts, with the large accounts representing a significant percentage of revenue. In these instances a revenue-based attrition analysis should be used with care to estimate the life characteristics and value associated with the customer population.