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Activity Number:
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364
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Type:
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Contributed
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Date/Time:
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Tuesday, August 4, 2009 : 2:00 PM to 3:50 PM
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Sponsor:
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Section on Statistics and Marketing
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| Abstract - #303791 |
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Title:
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A Multistage Approach to Estimating Customer Lifetime Value
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Author(s):
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Heather M. Johnston*+ and A. M. Santos
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Companies:
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IBM and IBM
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Address:
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32 Leonard Lane, Saugerties, NY, 12477,
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Keywords:
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Customer Lifetime Value ; Markov Chains ; Marketing ; White Space ; Customer Ranking ; Loyalty
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Abstract:
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Current customers were ranked by Customer Lifetime Value, computed using a Markov Model to predict probability of future purchase and regression to predict the amount of future purchase. Using firmographics, CLV estimates for potential customers were predicted based on their similarity to current customers. The Markov Model states were defined based on the standard recency and frequency methods, but also include customer purchase level tiers. The future purchase amount was predicted by a regression model using annual report data as well as industry trend and company growth predictions.
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