Final answer:
The churn rate refers to the percentage of customers that stop using a supplier's services over a certain time period, which is true. In a business context, accurate modeling of customer arrivals is crucial for understanding this rate and making strategic decisions.
Step-by-step explanation:
The term churn rate indeed refers to the number of customers who discontinue their services with a supplier over a specific period. This metric is vital for businesses to understand their customer retention and turnover. In the context of a cell phone contract, if we consider a random sample of 80 customers, determining the churn rate would involve tracking how many of those 80 customers exceeded their time allowance and potentially deciding to leave the service as a result.
Understanding customer behavior and arrival patterns is essential for businesses. For instance, if on average one customer arrives every two minutes, we could expect three customers to arrive within six minutes. However, this model might be oversimplified as it assumes a steady flow of individual customers, disregarding the possibility of group shopping or variations in customer flow during different times of the day.