IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Investigating Purchasing Patterns for Financial Services using Markov, MTD and MTDg Models

Listed author(s):




In the past, several authors have found evidence for the existence of a priority pattern of acquisition for durable goods, as well as for financial services. Its usefulness lies in the fact that if the position of a particular customer in this acquisition sequence is known, one can predict what service will be acquired next by that customer. In this paper, we analyse purchase sequences of financial services to identify cross-selling opportunities as part of a CRM (customer relationship management). Hereby, special attention is paid to transitions, which might encourage bank- or insurance only customers to become financial services customers. We introduce the Mixture Transition Distribution model (MTD) as a parsimonious alternative to the Markov model for use in the analysis of marketing problems. An interesting extension on the MTD model is the MTDg model, which is able to represent situations where the relationship between each lag and the current state differs. We illustrate the MTD and MTDg model on acquisition sequences of customers of a major financial-services company and compare the fit of these models with that of the corresponding Markov model. Our results are in favor of the MTD and MTDg models. Therefore, the MTD as well as the MTDg transition matrices are investigated in order to reveal cross-sell opportunities. The results are of great value to the product managers as they clarify the customer flows among product groups. In some cases, the lag-specific transition matrices of the MTDg model are better for the guidance of cross-sell actions than the general transition matrix of the MTD model.

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:
Download Restriction: no

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 03/213.

in new window

Length: 45 pages
Date of creation: Dec 2003
Handle: RePEc:rug:rugwps:03/213
Contact details of provider: Postal:
Hoveniersberg 4, B-9000 Gent

Phone: ++ 32 (0) 9 264 34 61
Fax: ++ 32 (0) 9 264 35 92
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Berger, Allen N., 2003. "The efficiency effects of a single market for financial services in Europe," European Journal of Operational Research, Elsevier, vol. 150(3), pages 466-481, November.
  2. Kasulis, Jack J & Lusch, Robert F & Stafford, Edward F, Jr, 1979. " Consumer Acquisition Patterns for Durable Goods," Journal of Consumer Research, Oxford University Press, vol. 6(1), pages 47-57, June.
  3. Stafford, Edward Jr. & Kasulis, Jack J. & Lusch, Robert F., 1982. "Consumer behavior in accumulating household financial assets," Journal of Business Research, Elsevier, vol. 10(4), pages 397-417, December.
  4. Hauser, John R & Urban, Glen L, 1986. " The Value Priority Hypotheses for Consumer Budget Plans," Journal of Consumer Research, Oxford University Press, vol. 12(4), pages 446-462, March.
  5. Wallace J. Hopp, 1987. "A Sequential Model of R&D Investment Over an Unbounded Time Horizon," Management Science, INFORMS, vol. 33(4), pages 500-508, April.
  6. Van den Poel, Dirk & Lariviere, Bart, 2004. "Customer attrition analysis for financial services using proportional hazard models," European Journal of Operational Research, Elsevier, vol. 157(1), pages 196-217, August.
  7. Clarke, Yvonne & Soutar, Geoffrey N, 1982. " Consumer Acquisition Patterns for Durable Goods: Australian Evidence," Journal of Consumer Research, Oxford University Press, vol. 8(4), pages 456-460, March.
  8. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
  9. Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999. "The consolidation of the financial services industry: Causes, consequences, and implications for the future," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 135-194, February.
  10. Leo Katz & Charles Proctor, 1959. "The concept of configuration of interpersonal relations in a group as a time-dependent stochastic process," Psychometrika, Springer;The Psychometric Society, vol. 24(4), pages 317-327, December.
  11. Hebden, J J & Pickering, J F, 1974. "Patterns of Acquisition of Consumer Durables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 36(2), pages 67-94, May.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:rug:rugwps:03/213. See general information about how to correct material in RePEc.

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

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.