Hello, I have a problem undestanding how to calculate attrition of users. I think it might be better to say an example:
Lets say I want to open e-shop and I would like to plan how many custommers I am going to have in one year. I opened it on 1.1.2012.
Each month there are 300 new unique registrations=users. At the end of year (12 months) i am planing to have 12*300 new custommers, but I must count with some customers that will cancel their account.
The annual attirition is given as 15% and I wonder what is the right way to calculate the number of customers by the end of year.
I would do this: 12*300*(1-0,15) = 3060
But I found this approach - calculate attrition for each month by portion of annual attriton rate and sum all results together
month1 = 300
month2 = 300*(1-0,15/12) => it means at the end of month 2 (February) I have 300 new customers starting in February plus 296 from January
month3 = (300*(1-0,15/12))*(1-0,15/12) => 300 From march + 296 from February + 293 from January
month12 = 300*(1-0,15/12)^11
This makes 3336 users at the end of the year
The second approach seems logical to me, but I am not sure if it is correct - the difference between 3060 and 3336 is quite big.
1) What is the correct way of calculating this - I would like to understand the difference between both ways and when to use them.
2) Can I just split annual rate (in this case 15%) by 12 get the monthly rate?
Could someone help me with it?