Modeling Within- and Across-Customer Association in Lifetime Value with Copulas

N. Glady, A. Lemmens, C. Croux

Research output: Working paper › Discussion paper › Other research output

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Abstract

Recent advances in linking Recency-Frequency-Monetary value (RFM) data to Customer Lifetime Value (CLV) in non-contractual settings rely on the assumption of independence between the transaction and spend processes. We propose to model jointly the inter- and intra-customer dependency between both processes using copulas, hereby accounting for the double correlation within and across customers. Applied to a unique data set of securities' transactions, we nd that modeling both associations enhances the accuracy of CLV predictions, thus improving customer valuation and selection tasks.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Number of pages40
Volume2010-103
Publication statusPublished - 2010

Publication series

NameCentER Discussion Paper
Volume2010-103

Fingerprint

Copula
Modeling
Customer lifetime value
Prediction
Recency

Keywords

  • Association
  • Copula
  • Customer Lifetime Value
  • Across and Within Customers

Cite this

Glady, N., Lemmens, A., & Croux, C. (2010). Modeling Within- and Across-Customer Association in Lifetime Value with Copulas. (CentER Discussion Paper; Vol. 2010-103). Tilburg: Econometrics.
Glady, N. ; Lemmens, A. ; Croux, C. / Modeling Within- and Across-Customer Association in Lifetime Value with Copulas. Tilburg : Econometrics, 2010. (CentER Discussion Paper).
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Glady, N, Lemmens, A & Croux, C 2010 'Modeling Within- and Across-Customer Association in Lifetime Value with Copulas' CentER Discussion Paper, vol. 2010-103, Econometrics, Tilburg.

Modeling Within- and Across-Customer Association in Lifetime Value with Copulas. / Glady, N.; Lemmens, A.; Croux, C.

Tilburg : Econometrics, 2010. (CentER Discussion Paper; Vol. 2010-103).

Research output: Working paper › Discussion paper › Other research output

TY - UNPB

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AU - Lemmens, A.

AU - Croux, C.

N1 - Pagination: 40

PY - 2010

Y1 - 2010

N2 - Recent advances in linking Recency-Frequency-Monetary value (RFM) data to Customer Lifetime Value (CLV) in non-contractual settings rely on the assumption of independence between the transaction and spend processes. We propose to model jointly the inter- and intra-customer dependency between both processes using copulas, hereby accounting for the double correlation within and across customers. Applied to a unique data set of securities' transactions, we nd that modeling both associations enhances the accuracy of CLV predictions, thus improving customer valuation and selection tasks.

AB - Recent advances in linking Recency-Frequency-Monetary value (RFM) data to Customer Lifetime Value (CLV) in non-contractual settings rely on the assumption of independence between the transaction and spend processes. We propose to model jointly the inter- and intra-customer dependency between both processes using copulas, hereby accounting for the double correlation within and across customers. Applied to a unique data set of securities' transactions, we nd that modeling both associations enhances the accuracy of CLV predictions, thus improving customer valuation and selection tasks.

KW - Association

KW - Copula

KW - Customer Lifetime Value

KW - Across and Within Customers

M3 - Discussion paper

VL - 2010-103

T3 - CentER Discussion Paper

BT - Modeling Within- and Across-Customer Association in Lifetime Value with Copulas

PB - Econometrics

CY - Tilburg

ER -

Glady N, Lemmens A, Croux C. Modeling Within- and Across-Customer Association in Lifetime Value with Copulas. Tilburg: Econometrics. 2010. (CentER Discussion Paper).