Generalizing Latent Attrition Models for Multi-Activity Customer Base Analysis

36 Pages Posted: 21 May 2013

See all articles by David A. Schweidel

David A. Schweidel

McDonough School of Business, Georgetown University

Young-Hoon Park

Cornell University - Samuel Curtis Johnson Graduate School of Management

Zainab Jamal

HP Labs

Date Written: May 2013

Abstract

Customer base analysis is a key element in customer valuation and can provide guidance for decisions such as resource allocation. Yet, extant models often focus on a single activity, such as purchases from a retailer or donations to a non-profit organization. These models do not consider other ways that an individual may engage with an organization, such as purchasing in multiple categories or contributing user-generated content. In this research, we propose a framework to generalize extant models for customer base analysis to multiple activities.

Using the data from a website that allows users to purchase digital content and/or post digital content at no charge, we develop a flexible "buy 'til you die" model to empirically examine how the two activities are related. Compared to benchmarks, our model more accurately forecasts the future behavior for both types of activities. In addition to finding evidence of coincidence between the activities while customers are "alive," we find that the latent attrition processes are related. This suggests that conducting one type of activity is informative of whether customers are still "alive" to conduct another type of activity, and consequently impacts inferences of customer value.

Keywords: customer base analysis, Latent Changepoint Model, Multivariate Choice Model

Suggested Citation

Schweidel, David A. and Park, Young-Hoon and Jamal, Zainab, Generalizing Latent Attrition Models for Multi-Activity Customer Base Analysis (May 2013). Available at SSRN: https://ssrn.com/abstract=2267991 or http://dx.doi.org/10.2139/ssrn.2267991

David A. Schweidel (Contact Author)

McDonough School of Business, Georgetown University ( email )

Washington, DC 20057
United States

Young-Hoon Park

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853-6201
United States
(607) 255-3217 (Phone)

Zainab Jamal

HP Labs ( email )

United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
151
Abstract Views
1,472
rank
232,456
PlumX Metrics