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Publication type: Article in scientific journal
Type of review: Peer review (publication)
Title: Modelling customer lifetime value in contractual settings
Authors: Heitz, Christoph
Dettling, Marcel
Ruckstuhl, Andreas
DOI: 10.21256/zhaw-1899
Published in: International Journal of Services Technology and Management
Volume(Issue): 16
Issue: 2
Page(s): 172
Pages to: 190
Issue Date: 2011
Publisher / Ed. Institution: Inderscience
ISSN: 1460-6720
Language: English
Subjects: Markov chain model; Direct marketing; Newspaper subscription; Customer dynamics
Subject (DDC): 658.8: Marketing management
Abstract: Service provision is often governed by a contract (e.g., newspaper subscriptions, phone contracts, and credit agreements). Typically, such a contract includes rules that influence the dynamics of the customer in the marketplace. Typical examples are minimum contract durations, or fixed time instants for contract termination. The goal of these rules is to increase the future total profit gained from the customer, which is usually denoted with the term customer lifetime value (CLV). We analyse the problem of calculating the CLV under general contract structures. We show that classical Markov models for describing the customer dynamics are not appropriate and may lead to huge errors in the CLV. We propose a semi-Markov formulation which leads to substantially better results. We apply the framework to data of newspaper subscription.
Fulltext version: Published version
License (according to publishing contract): Licence according to publishing contract
Departement: School of Engineering
Organisational Unit: Institute of Data Analysis and Process Design (IDP)
Appears in collections:Publikationen School of Engineering

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