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A business that has a 75 percent customer retention rate has an an average customer life of 6 years.

a)True
b)False

User Hari Honor
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1 Answer

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Final answer:

The statement that a business with a 75 percent customer retention rate has an average customer life of 6 years is false. The average customer life span with such a retention rate is actually 4 years.

Step-by-step explanation:

The statement is false. A business that has a 75 percent customer retention rate does not necessarily have an average customer life of 6 years. The average customer life span, or customer lifetime, can be estimated using the formula 1/(1-retention rate). A 75 percent retention rate implies an average customer life of 1/(1-0.75), which equals 4 years, not 6 years.

Customer retention rate is important for calculating how long, on average, a customer continues to patronize a business. The average time between customer arrivals or the time it takes for a certain number of customers to arrive is related to queuing theory, and these values are often modeled with an exponential distribution in business scenarios.

User AhmFM
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