How Customer Evolve: A New Framework for Customer Analysis

49 Pages Posted: 29 Sep 2013

Date Written: Jannuary 8, 2009

Abstract

Most customer-focused enterprises now have the ability to maintain a historical record of their customer transactions over a period of time. In this study we propose a new framework for customer analysis that takes advantage of this historical record, identifying typical states or segments occupied by any customer at any point in time, and the pattern of movements by a customer-cohort among these states over time, thereby taking into account both the heterogeneity in needs and value across the customer base, and the fact that customer relationships evolve between the extreme stages of acquisition and termination. This new framework integrates two important concepts in customer relationship management- customer segmentation and customer lifecycle, as we discuss and illustrate with an analysis of newly-acquired customers by a retail bank.

Keywords: Customer Relationship Management, Customer lifecycle, Hidden Markov Models

Suggested Citation

Kamakura, Wagner A., How Customer Evolve: A New Framework for Customer Analysis (Jannuary 8, 2009). Available at SSRN: https://ssrn.com/abstract=2332235 or http://dx.doi.org/10.2139/ssrn.2332235

Wagner A. Kamakura (Contact Author)

Rice University ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States
(713) 348-6307 (Phone)

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