What is Attrition in Business?

Definition: Customer attrition is a situation where the client’s relationship with the company is ended or lost. In other words, the client stops demanding what the company offers.

What Does Customer Attrition Mean?

This concept of attrition also has an application for labor situations, and it refers to the scenario where employees leave the company under different circumstances. Let’s focus on customer’s attrition. This phenomenon happens due to many different reasons. Customers can leave a company either voluntarily or involuntarily. Voluntary attrition is a situation where the client consciously terminates its relationship with the company.

This type of attrition can be caused by unsatisfactory results obtained from the product or service bought; improper customer service, malfunctions and low-quality perception, among many other different factors that may cause a client to decide not to continue purchasing anything from the company.

On the other hand, involuntary attrition is the situation in which the client’s relationship with the company is stopped due to uncontrollable circumstances. The most common reasons for involuntary attrition are that the customer moves outside of the company’s geographical reach, the client steps out of the company demographic target or the customer’s death.

Here’s an illustration of this situation.

Example

Mr. Attkins is a 53 years old man that lives in Milwaukee. His daily routines include stopping by a small coffee shop that is close to where he lives and after work he stops by a local bakery on his way home. The company where Mr. Attkins work is relocating him to another city next week and he will be based in that other city for an unknown period of time. To the local bakery and the coffee shop where he used to stop by, what kind of attrition would this be?

According to our concept, customer attrition is a situation where the client’s relationship with a company is ended or lost. Now, Mr. Attkin’s situation would be an involuntary attrition scenario, since the reason these two stores will lose him as a client is beyond his control, in this case, he’s moving out to another city.