Final answer:
The statement that a business with a 75 percent customer retention rate has an average customer life of 6 years is false. The average customer life span with such a retention rate is actually 4 years.
Step-by-step explanation:
The statement is false. A business that has a 75 percent customer retention rate does not necessarily have an average customer life of 6 years. The average customer life span, or customer lifetime, can be estimated using the formula 1/(1-retention rate). A 75 percent retention rate implies an average customer life of 1/(1-0.75), which equals 4 years, not 6 years.
Customer retention rate is important for calculating how long, on average, a customer continues to patronize a business. The average time between customer arrivals or the time it takes for a certain number of customers to arrive is related to queuing theory, and these values are often modeled with an exponential distribution in business scenarios.