How Customer Evolve: A New Framework for Customer Analysis
49 Pages Posted: 29 Sep 2013
Date Written: Jannuary 8, 2009
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
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