Hello,
I have two ways of calculating same thing, but each way gives different result. Here is the problem:
I want to open an e-shop and I would like to know how many customers 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 planning to have 12*300 new customers, but I must count with some customers that will cancel their account during the year.
The expected annual loss of clients is 15%
I would do this: 12*300*(1-0,15) = 3060 (number of customers after one year).
But I found different way - calculate loss of clients for each month by portion of annual loss (15% divided by 12) 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.
My questions:
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) If I use the second way, can I still say that the annual attrition is 15%? Because 264 (3600-3336) is not 15% from 3600.
Could anyone help me with this?
I have two ways of calculating same thing, but each way gives different result. Here is the problem:
I want to open an e-shop and I would like to know how many customers 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 planning to have 12*300 new customers, but I must count with some customers that will cancel their account during the year.
The expected annual loss of clients is 15%
I would do this: 12*300*(1-0,15) = 3060 (number of customers after one year).
But I found different way - calculate loss of clients for each month by portion of annual loss (15% divided by 12) 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.
My questions:
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) If I use the second way, can I still say that the annual attrition is 15%? Because 264 (3600-3336) is not 15% from 3600.
Could anyone help me with this?