I use a different method for calculating the "Avg customer lifetime (months)", which is implied by some logic from a great book called The Loyalty Effect: http:

I use a different method for calculating the "Avg customer lifetime (months)", which is implied by some logic from a great book called The Loyalty Effect: http://books.google.com/books?id=ctAj_SfSrKIC&printsec=frontcover http://books.google.com/books?id=ctAj_SfSrKIC&printsec=f... Using this formula, I get different results for "Avg customer lifetime (months)" than the OP. I calculate the average length of the customer tenure based on the formula: 0.5 = (1-churn%)^t, where "churn%" is the monthly churn rate, and t is time passed in months. Basically, this formula says: when will 50% of the customers be left? You can solve for t: 0.5 = (1-churn%)^t ln (0.5) =ln(1 - churn%)^t ln (0.5) =t x ln(1 - churn%) t = ln (0.5) / ln (1 - churn%) You can test this math by calculating how long t is for a churn of 50% (it's 1 month). Using this math, the average tenure for a monthly churn of 1% would be 60 months. The average tenure is useful because you can then do a discounted cash flow analysis on 100% of the cash flows until time t, to calculate the lifetime value of the average customer. So in this case, you would be discounting 100% of 60 months of cash flows. The average tenure goes down rapidly as you increase the churn rate. At 2% churn, the average tenure is 34 months. At 3%, it's 23 months. At 5%, it's 14 months. And at 10%, it's 7 months. If you have enough data, you can use a non-constant churn rate as well, as churn rate definitely goes down over time.