Attrition Analysis, the Exponential Distribution, and Customer Life Expectancy

Richard K. Ellsworth

doi:10.5791/0897-1781-29.2.54

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Article Contents

Abstract
Customer Retirement Behavior
Attrition Analysis
Exponential Survival Distribution
Illustrative Examples
Conclusion

Editorial Type:

Article Category: Research Article

Online Publication Date: 01 Jun 2010

Attrition Analysis, the Exponential Distribution, and Customer Life Expectancy

PE, ASA, CFA

Page Range: 54 – 59

DOI: 10.5791/0897-1781-29.2.54

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Abstract

Attrition analysis is a statistical method that is applied to estimate life expectancy for grouped customer populations. With a foundation in actuarial science, attrition analysis is used to develop customer life characteristics when informational limitations preclude the use of other statistical methods. Attrition analysis examines customer retirement activity to construct a survivor curve that describes the pattern of customer decline from a population.

Figure 1

Exponential Survivor Curve

Figure 2

Exponential Survivor Curve

Contributor Notes

Richard K. Ellsworth is with Deloitte Financial Advisory Services LLP. He is an Accredited Senior Appraiser (ASA) in Business Valuation as well as a licensed Professional Engineer (PE) and a Chartered Financial Analyst (CFA). The views expressed in this article are those of the author and do not necessarily represent the views of Deloitte Financial Advisory Services LLP.