1.2 What is attrition?

Customer attrition or churn occurs when a client discontinues using a service or a product offered by a firm. Churn analysis corresponds to both measurement and prediction of the attrition rate in the customer base of the company. Evaluating attrition depends on the type of relationship between the firm and its clients. When it is defined by a contract, the customer has to inform the firm about their service termination. In the telecom industry, a consumer is required to notify their TSP before going to a competing company. In an opposite way, the firm/client relationship can be non-contractual. In that case, the service termination does not need to be notified. Attrition then becomes a latent variable and more advanced models are used to make forecasts.