4 ms·
Implicit here is an assumption that the lifetime of subscribers is exponentially distributed. Which may or may not be the case.
by cluoma 9y ago
Implicit here is an assumption that the lifetime of subscribers is exponentially distributed. Which may or may not be the case.
- patio11 9y ago"Churn rates are constant given age" is a model which is generally false-but-useful at SaaS companies, particularly for ages over 2~3 billing periods (months), while folks are basically on extended trialing before really deciding on adoption or not.
- eterm 9y agoI agree, if you're going to the trouble of modelling then a stochastic matrix (markov chain) is a much better model. You can model it as a markov chain where each month there's a probability of moving to age + 1 or a probability of becoming 'ex-sub' (general population). You also have a transition from 'general population' to 'month 1' to represent new sign-ups. That has the advantage that you can still find the stationary distribution (steady-state) of the chain without simulation and it doesn't treat churn as being the same for each subscriber age. (It still has it time-homogeneous for a given age of course).
- Grustaf 9y agoSaying that you lose r% of clients each month should be enough information, why should the distribution of customer longevity be interesting?