Advanced Search
MyIDEAS: Login

Customer Base Analysis: An Industrial Purchase Process Application

Contents:

Author Info

  • David C. Schmittlein

    (University of Pennsylvania)

  • Robert A. Peterson

    (University of Texas at Austin)

Registered author(s):

    Abstract

    Customer base analysis is concerned with using the observed past purchase behavior of customers to understand their current and likely future purchase patterns. More specifically, as developed in Schmittlein et al. (1987), customer base analysis uses data on the frequency, timing, and dollar value of each customer's past purchases to infer • the number of customers currently active, • how that number has changed over time, • which individual customers are most likely still active, • how much longer each is likely to remain an active customer, and • how many purchases can be expected from each during any future time period of interest. In this paper we empirically validate the model proposed by Schmittlein et al. In doing so, we provide one of the few applications of stochastic models to industrial purchase processes and industrial marketing decisions. Besides showing that the model does capture key aspects of the purchase process, we also present a more effective parameter estimation method and some results regarding sampling properties of the parameter estimates. Finally, we extend the model to explicitly incorporate dollar volume of past purchases. Our results indicate that this kind of customer base analysis can be both effective in predicting purchase patterns and in generating insights into how key customer groups differ. The link of both these benefits to industrial marketing decision making is also discussed.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://dx.doi.org/10.1287/mksc.13.1.41
    Download Restriction: no

    Bibliographic Info

    Article provided by INFORMS in its journal Marketing Science.

    Volume (Year): 13 (1994)
    Issue (Month): 1 ()
    Pages: 41-67

    as in new window
    Handle: RePEc:inm:ormksc:v:13:y:1994:i:1:p:41-67

    Contact details of provider:
    Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA
    Phone: +1-443-757-3500
    Fax: 443-757-3515
    Email:
    Web page: http://www.informs.org/
    More information through EDIRC

    Related research

    Keywords: estimation and other statistical techniques; industrial marketing; measurement; promotion;

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Makoto Abe, 2006. ""Counting Your Customers" One by One: An Individual Level RF Analysis Based on Consumer Behavior Theory," CIRJE F-Series CIRJE-F-408, CIRJE, Faculty of Economics, University of Tokyo.
    2. Gary Lilien & Rajdeep Grewal & Douglas Bowman & Min Ding & Abbie Griffin & V. Kumar & Das Narayandas & Renana Peres & Raji Srinivasan & Qiong Wang, 2010. "Calculating, creating, and claiming value in business markets: Status and research agenda," Marketing Letters, Springer, vol. 21(3), pages 287-299, September.
    3. John Robst & Kimmarie McGOLDRICK, 1999. "The Measurement of Firm Information About Product Demand," Review of Industrial Organization, Springer, vol. 15(2), pages 149-163, September.
    4. Siddharth Singh & Sharad Borle & Dipak Jain, 2009. "A generalized framework for estimating customer lifetime value when customer lifetimes are not observed," Quantitative Marketing and Economics, Springer, vol. 7(2), pages 181-205, June.
    5. Netzer, Oded & Lattin, James M. & Srinivasan, V. "Seenu", 2007. "A Hidden Markov Model of Customer Relationship Dynamics," Research Papers 1904r, Stanford University, Graduate School of Business.
    6. Reimer, Kerstin & Albers, Sönke, 2011. "Modeling Repeat Purchases in the Internet when RFM Captures Past Influence of Marketing," EconStor Preprints 50730, ZBW - German National Library of Economics.
    7. Glady, Nicolas & Baesens, Bart & Croux, Christophe, 2007. "A modified Pareto/NBD approach for predicting customer lifetime value," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/175502, Katholieke Universiteit Leuven.
    8. W.R Buckinx & D. Van Den Poel, 2003. "Predicting Online Purchasing Behavior," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/195, Ghent University, Faculty of Economics and Business Administration.
    9. Verhoef, P.C. & Donkers, A.C.D., 2001. "Predicting Customer Potential Value: an application in the insurance industry," Research Paper ERS-2001-01-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
    10. Buckinx, Wouter & Van den Poel, Dirk, 2005. "Customer base analysis: partial defection of behaviourally loyal clients in a non-contractual FMCG retail setting," European Journal of Operational Research, Elsevier, vol. 164(1), pages 252-268, July.
    11. Mercedes Esteban Bravo & José M. Vidal-Sanz & Gökhan Yildirim, 2012. "Valuing customer portfolios with endogenous mass-and-direct-marketing interventions using a stochastic dynamic programming decomposition," Business Economics Working Papers wb121304, Universidad Carlos III, Departamento de Economía de la Empresa.
    12. Shaohui Ma & Joachim Büschken, 2011. "Counting your customers from an “always a share” perspective," Marketing Letters, Springer, vol. 22(3), pages 243-257, September.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:13:y:1994:i:1:p:41-67

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.