Empirical validation and comparison of models for customer base analysis

The benefits of retaining customers have led companies to search for means of profiling their customers individually and tracking their retention and defection behaviors. To this end, the main issues addressed in customer base analysis are identification of customer active/inactive status and predic...

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Bibliographic Details
Published in:International journal of research in marketing 2007-09, Vol.24 (3), p.201-209
Main Authors: Batislam, Emine Persentili, Denizel, Meltem, Filiztekin, Alpay
Format: Article
Language:English
Subjects:
BG/NBD
Comparative analysis
Consumer behavior
Customer base analysis
Customer lifetime value
Customer retention
Grocery stores
Mathematical models
Pareto/NBD
Probability models
Studies
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Summary:The benefits of retaining customers have led companies to search for means of profiling their customers individually and tracking their retention and defection behaviors. To this end, the main issues addressed in customer base analysis are identification of customer active/inactive status and prediction of future purchase levels. We compare the predictive performance of Pareto/NBD and BG/NBD models from the customer base analysis literature — in terms of repeat purchase levels and active status — using grocery retail transaction data. We also modify the BG/NBD model to incorporate zero repeat purchasers. All models capture the main characteristics of the purchase and dropout process of individual customers and produce similar forecasts. There are some deviations in the cumulative purchase estimates of the models, which may be due to the characteristics of grocery purchasing.
ISSN:0167-8116
1873-8001
DOI:10.1016/j.ijresmar.2006.12.005