Abstract

http://ssrn.com/abstract=930745
 
 

References (7)



 
 

Citations (2)



 


 



Estimating Clv Using Aggregated Data: the Tuscan Lifestyles Case Revisited


Peter Fader


University of Pennsylvania - Marketing Department

Bruce Hardie


London Business School

Kinshuk Jerath


Columbia University - Columbia Business School

March 2007


Abstract:     
The Tuscan Lifestyles case (Mason 2003) offers a simple twist on the standard view of how to value a newly acquired customer, highlighting how standard retention-based approaches to the calculation of expected CLV are useless in a noncontractual setting. Using the data presented in the case, it is a simple exercise to compute an estimate of expected five-year CLV. However, if we wish to arrive at an estimate of CLV that includes the customer's life beyond five years or are interested in, say, sorting out the purchasing process (while alive) from the attrition process, we need to use a formal model of buying behavior. To tackle this problem, we utilize the Pareto/NBD model developed by Schmittlein, Morrison and Colombo (1987). However, existing analytical results do not allow us to estimate the model parameters using the data summaries presented in the case. We therefore derive an expression that enables us to do this. The resulting parameter estimates and subsequent calculations offer useful insights that could not have been obtained without the formal model. For instance, we were able to decompose the lifetime value into four factors, namely purchasing while active, dropout, surge in sales in the first year and monetary value of the average purchase. We observed a kind of triple jeopardy in that the more valuable cohort proved to be better on the three most critical factors.

Number of Pages in PDF File: 27

Keywords: customer lifetime value, Pareto/NBD

working papers series


Download This Paper

Date posted: September 18, 2006  

Suggested Citation

Fader, Peter and Hardie, Bruce and Jerath, Kinshuk, Estimating Clv Using Aggregated Data: the Tuscan Lifestyles Case Revisited (March 2007). Available at SSRN: http://ssrn.com/abstract=930745 or http://dx.doi.org/10.2139/ssrn.930745

Contact Information

Peter Fader (Contact Author)
University of Pennsylvania - Marketing Department ( email )
700 Jon M. Huntsman Hall
3730 Walnut Street
Philadelphia, PA 19104-6340
United States

Bruce Hardie
London Business School ( email )
Regent's Park
London, NW1 4SA
United Kingdom
Kinshuk Jerath
Columbia University - Columbia Business School ( email )
3022 Broadway
New York, NY 10027
United States

Feedback to SSRN


Paper statistics
Abstract Views: 1,741
Downloads: 372
Download Rank: 43,636
References:  7
Citations:  2

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.297 seconds