Customer retention

What metric is used by most firms to gauge and guide their retention activities? 

!! Churn/attrition rate (or retention rate) 

!! This is a good metric, but you need to examine it at the 

right level

There is no “average” customer, and calculations based on such a notion will always underestimate the value of a customer base 

"! And the difference can be huge

When heterogeneity is accounted for, the “attrition elasticity” is much lower than in the homogeneous case "! Investments in reducing attrition will have more modest returns than expected 

“Because we can’t get accurate calculations with averages, we must work with the 

actual rates for each separate class of customers.” Reichheld, “The Loyalty Effect,” p. 54