Attrition Analysis, Midperiod Convention and Customer Retirement Forecasts

Abstract

Attrition analysis is widely used by valuation professionals as a recognized method to forecast customer population retirement behavior. With attrition analysis, an expected customer population retirement profile is developed through the study of historical customer retirement activity and applied to the customer population when valuing customer relationship intangible assets. As a frequent reviewer of customer relationship valuations, valuation practitioners regularly develop an attrition analysis founded on a midperiod retirement convention but then apply an end of period convention when forecasting customer retirements. Since attrition analysis relies on midperiod retirement convention and the exponential distribution, analytical consistency is maintained when a midperiod retirement convention is used to forecast customer retirement behavior for the valuation of customer relationship intangible assets.