Counting Your Customers: Who-Are They and What Will They Do Next?

This article is concerned with counting and identifying those customers who are still active. The issue is important in at least three settings: monitoring the size and growth rate of a firm's ongoing customer base, evaluating a new product's success based on the pattern of trial and repea...

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Bibliographic Details
Published in:Management science 1987-01, Vol.33 (1), p.1-24
Main Authors: Schmittlein, David C, Morrison, Donald G, Colombo, Richard
Format: Article
Language:English
Subjects:
Birth control
brokerage firms
Brokerages
Business structures
Consumer behavior
Customer bases
Customers
Heuristics
Management science
Market segmentation
Marketing
Marketing strategies
Mathematical analysis
Mortality
new product introductions
poisson process
Probability
probability mixture models
Purchasing
Securities industry
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Summary:This article is concerned with counting and identifying those customers who are still active. The issue is important in at least three settings: monitoring the size and growth rate of a firm's ongoing customer base, evaluating a new product's success based on the pattern of trial and repeat purchases, and targeting a subgroup of customers for advertising and promotions. We develop a model based on the number and timing of the customers' previous transactions. This approach allows computation of the probability that any particular customer is still active. Several numerical examples are used to illustrate applications of the model.
ISSN:0025-1909
1526-5501
DOI:10.1287/mnsc.33.1.1