Modeling Within- and Across-Customer Association in Lifetime Value with Copulas
AbstractRecent advances in linking Recency-Frequency-Monetary value (RFM) data to Customer Lifetime Value (CLV) in non-contractual settings rely on the assumption of independence between the transaction and spend processes. We propose to model jointly the inter- and intra-customer dependency between both processes using copulas, hereby accounting for the double correlation within and across customers. Applied to a unique data set of securities' transactions, we nd that modeling both associations enhances the accuracy of CLV predictions, thus improving customer valuation and selection tasks.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2010-103.
Date of creation: 2010
Date of revision:
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Web page: http://center.uvt.nl
Association; Copula; Customer Lifetime Value; Across and Within Customers;
Find related papers by JEL classification:
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-23 (All new papers)
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