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Forecasting Repeat Sales at CDNOW: A Case Study

Author

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  • Peter S. Fader

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104-6371)

  • Bruce G. S. Hardie

    (London Business School, Regent's Park, London NW1 4SA, United Kingdom)

Abstract

We conducted a modeling exercise in conjunction with the online music retailer CDNOW to develop a simple stochastic model of buyer behavior capable of forecasting medium-term aggregate CD purchasing by a cohort of new customers. We modeled weekly sales using a finite mixture of beta-geometric distributions with a separate time-varying component to capture nonstationarity in repeat buying. The resulting model can easily be implemented within a standard spreadsheet environment (for example, Microsoft Excel). It does a good job of describing the underlying sales patterns and produces an excellent medium-term forecast.

Suggested Citation

  • Peter S. Fader & Bruce G. S. Hardie, 2001. "Forecasting Repeat Sales at CDNOW: A Case Study," Interfaces, INFORMS, vol. 31(3_supplem), pages 94-107, June.
    • Handle: RePEc:inm:orinte:v:31:y:2001:i:3_supplement:p:s94-s107
    DOI: 10.1287/inte.31.3s.94.9683
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    References listed on IDEAS

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    1. Morrison, Donald G & Schmittlein, David C, 1988. "Generalizing the NBD Model for Customer Purchases: What Are the Implications and Is It Worth the Effort?," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(2), pages 145-159, April.
    2. Morrison, Donald G & Schmittlein, David C, 1988. "Generalizing the NBD Model for Customer Purchases: What Are the Implications and Is It Worth the Effort? Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(2), pages 165-166, April.
    3. 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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    Citations

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    Cited by:

    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.
    2. Zan Huang & Daniel D. Zeng & Hsinchun Chen, 2007. "Analyzing Consumer-Product Graphs: Empirical Findings and Applications in Recommender Systems," Management Science, INFORMS, vol. 53(7), pages 1146-1164, July.
    3. Edward I. Brody, 2001. "Marketing Engineering at BBDO," Interfaces, INFORMS, vol. 31(3_supplem), pages 74-81, June.
    4. Romero, Jaime & van der Lans, Ralf & Wierenga, Berend, 2013. "A Partially Hidden Markov Model of Customer Dynamics for CLV Measurement," Journal of Interactive Marketing, Elsevier, vol. 27(3), pages 185-208.
    5. Bas Donkers & Peter Verhoef & Martijn Jong, 2007. "Modeling CLV: A test of competing models in the insurance industry," Quantitative Marketing and Economics (QME), Springer, vol. 5(2), pages 163-190, June.
    6. Peter S. Fader & Bruce G. S. Hardie & Chun-Yao Huang, 2004. "A Dynamic Changepoint Model for New Product Sales Forecasting," Marketing Science, INFORMS, vol. 23(1), pages 50-65, October.
    7. Eduardo Gutiérrez González & Olga Vladimirovna Panteleeva, 2020. "A model for planning and optimizing an engineering company production," OPSEARCH, Springer;Operational Research Society of India, vol. 57(3), pages 669-699, September.
    8. Michael Platzer & Thomas Reutterer, 2016. "Ticking Away the Moments: Timing Regularity Helps to Better Predict Customer Activity," Marketing Science, INFORMS, vol. 35(5), pages 779-799, September.
    9. Pablo Marshall, 2015. "A simple heuristic for obtaining pareto/NBD parameter estimates," Marketing Letters, Springer, vol. 26(2), pages 165-173, June.
    10. Shi, Ruixia & Chen, Hongyu & Sethi, Suresh P., 2019. "A generalized count model on customers' purchases in O2O market," International Journal of Production Economics, Elsevier, vol. 215(C), pages 121-130.
    11. Reutterer, Thomas & Platzer, Michael & Schröder, Nadine, 2021. "Leveraging purchase regularity for predicting customer behavior the easy way," International Journal of Research in Marketing, Elsevier, vol. 38(1), pages 194-215.
    12. Larry J. LeBlanc & Michael R. Galbreth, 2007. "Implementing Large-Scale Optimization Models in Excel Using VBA," Interfaces, INFORMS, vol. 37(4), pages 370-382, August.

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