Predicting Customer Lifetime Value in Multi-Service Industries

Bas Donkers, Peter Verhoef and Martijn de Jong

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: Customer lifetime value (CLV) is a key-metric within CRM. Although, a large number of marketing scientists and practitioners argue in favor of this metric, there are only a few studies that consider the predictive modeling of CLV. In this study we focus on the prediction of CLV in multi-service industries. In these industries customer behavior is rather complex, because customers can purchase more than one service, and these purchases are often not independent from each other. We compare the predictive performance of different models, which vary in complexity and realism. Our results show that for our application simple models assuming constant profits over time have the best predictive performance at the individual customer level. At the customer base level more complicated models have the best performance. At the aggregate level, forecasting errors are rather small, which emphasizes the usability of CLV predictions for customer base valuation purposes. This might especially be interesting for accountants and financial analysts.

Keywords: customer lifetime value; customer relationship management; customer segmentation; database marketing; forecasting; interactive marketing; value (search for similar items in EconPapers)
JEL-codes: C44 C53 G17 M M31 (search for similar items in EconPapers)
Date: 2003-04-29
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://repub.eur.nl/pub/325/ERS-2003-038-MKT.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ems:eureri:325

Access Statistics for this paper

More papers in ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam Contact information at EDIRC.
Bibliographic data for series maintained by RePub ( this e-mail address is bad, please contact ).