And so, if we look at a two segment example,
where Segment 1 consisted of one-third of our customers,
Segment 2 consists of two-thirds of our customers initially.
But let's look at the differences in the retention rates.
Difference in the retention rate.
We've got a retention rate for one group of 0.9,
retention rate for another group of 0.5.
All right, well, the Segment 1, those are the people more likely to stick around.
Segment 2, those are the ones that are going to drop out much more quickly.
Well, if we take a look at the retention behavior for Segment 1.
Here's our focus on Segment 1, where we retain 90%,
so we lose 10% of our customers in this segment each period.
In Segment 2, what's happening?
Higher churn rate, so we're going to lose 50% of our customers in each time period.
All right, well, when we look at the total number of customers that remain,
notice that by the time we're out into the fifth period,
2,187 from segment 1, 2,600 total.
So even though this is the smaller segment, it's those customers who
are going to be represented later on just because they have insurance.
So you're losing your fast churners early on.
The ones who remain are probably the ones who are low churners to begin with.
They may be one who are inherently more loyal to your particular company.
All right, so we do want to draw that distinction between customer lifetime
value for new prospects.
Residual lifetime value when it comes to looking at your current customers.
And for a given investment, where do we put our money?
Do we put that money into acquiring prospects?
Well, we don't know that much about the prospects.
We know a lot more about the people who've stuck around for a while.
But the down side is putting money into customer retention.
If these are the customers who are so loyal to you already,
you may not have the opportunity to increase that retention rate very much.
And so, that's going to factor in when we're trying to think through,
is the dollar best spent on acquisition or best spent on retention?