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Customer Lifetime Value Estimation in a Multi-Product Environment


Wieser, C; Stahl, F (2010). Customer Lifetime Value Estimation in a Multi-Product Environment. In: 39th EMAC Conference, Copenhagen, 1 June 2010 - 4 June 2010.

Abstract

Models about customer lifetime value (CLV) explicitly or implicitly assume a “one-firm oneproduct” environment. We show empirically what problems occur when CLV models are used within a multi-product company. In 99.9% of the cases the summation of the product specific CLVs do not equal the directly estimated CLVs on product portfolio level. When CLVs are used to differentiate between customers, top customers on an aggregated portfolio level differ in more than 20% if estimation approaches are changed. The use of CLVs on product basis only, leads further to a systematic neglect of 30% of a firm’s true best customers.

Models about customer lifetime value (CLV) explicitly or implicitly assume a “one-firm oneproduct” environment. We show empirically what problems occur when CLV models are used within a multi-product company. In 99.9% of the cases the summation of the product specific CLVs do not equal the directly estimated CLVs on product portfolio level. When CLVs are used to differentiate between customers, top customers on an aggregated portfolio level differ in more than 20% if estimation approaches are changed. The use of CLVs on product basis only, leads further to a systematic neglect of 30% of a firm’s true best customers.

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Additional indexing

Item Type:Conference or Workshop Item (Paper), refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Customer lifetime value (CLV), BG/NDB model, probability models, multi-product company
Language:English
Event End Date:4 June 2010
Deposited On:05 Jan 2011 17:20
Last Modified:05 Apr 2016 14:32
Free access at:Related URL. An embargo period may apply.
Official URL:http://www.emac2010.org
Related URLs:http://www.emac2010.org (Organisation)
Permanent URL: http://doi.org/10.5167/uzh-41306

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