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The role of lifetime activity cues in customer base analysis

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  • Hoppe, Daniel
  • Wagner, Udo

Abstract

This paper develops the notion of lifetime activity cues in customer base analysis. The authors first discuss the impact of lifetime indicators, such as customers' conceptual response to marketing activities, and then demonstrate how such lifetime cues can be embedded into the Pareto/NBD model. The authors theoretically analyze the implication of this additional behavioral indication on the model's predictions. In an illustrative example, they aim to establish an intuitive understanding of the effects of such information. Evidence from the cellular phone industry supports the relevance of this concept: The empirical study finds a substantial improvement in predictive accuracy in two independent holdout samples. The study concludes with a discussion of the managerial relevance of the proposed approach and opportunities for further research.

Suggested Citation

  • Hoppe, Daniel & Wagner, Udo, 2014. "The role of lifetime activity cues in customer base analysis," Journal of Business Research, Elsevier, vol. 67(5), pages 983-989.
    • Handle: RePEc:eee:jbrese:v:67:y:2014:i:5:p:983-989
    DOI: 10.1016/j.jbusres.2013.08.004
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    References listed on IDEAS

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    1. Peter S. Fader & Bruce G. S. Hardie & Ka Lok Lee, 2005. "“Counting Your Customers” the Easy Way: An Alternative to the Pareto/NBD Model," Marketing Science, INFORMS, vol. 24(2), pages 275-284, August.
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    3. Makoto Abe, 2009. "“Counting Your Customers” One by One: A Hierarchical Bayes Extension to the Pareto/NBD Model," Marketing Science, INFORMS, vol. 28(3), pages 541-553, 05-06.
    4. Donald G. Morrison & David C. Schmittlein, 1981. "Predicting Future Random Events Based on Past Performance," Management Science, INFORMS, vol. 27(9), pages 1006-1023, September.
    5. David C. Schmittlein & Donald G. Morrison & Richard Colombo, 1987. "Counting Your Customers: Who-Are They and What Will They Do Next?," Management Science, INFORMS, vol. 33(1), pages 1-24, January.
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