Are Revived Customers as Good as New?
37 Pages Posted: 12 Mar 2009 Last revised: 25 May 2016
Date Written: May 1, 2016
Abstract
Customers come and go, and some return. Is their behavior the same, better or worse when they return? To answer this we first define revived customers in a non-contractual setting. Next, we compare the purchasing behavior of revived customers before and after the period of inactivity. The Customer Lifetime Value (CLV) models in the targeting literature make the implicit assumption that the buying behavior of revived customers is the same as the buying behavior of active customers (Equality Assumption). The third objective of our study is to investigate whether this assumption holds or not.
For our analyses, we use an extended Pareto/NBD model. We have three main findings from our study. First, we find that revived customers exist in non-contractual settings. Second, we show that higher past purchase frequency (strongly habitual) customers have greater consistency in purchasing behavior than lower past purchase frequency (weakly habitual) customers. The final key finding is that the equality assumption is not valid for, i.e., revived customers have different purchasing behavior than active customers.
Keywords: Pareto/NBD Model, Hierarchical Bayes, Purchase Rate, Revived Customer, Habitual Behavior, Non-contractual Setting
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
New Perspectives on Customer 'Death' Using a Generalization of the Pareto/NBD Model
By Kinshuk Jerath, Peter Fader, ...
-
By Siddharth S. Singh, Sharad Borle, ...
-
Incorporating Direct Marketing Activity into Latent Attrition Models
By David A. Schweidel and George Knox
-
Extending the BG/NBD: A Simple Model of Purchases and Complaints
By Rutger Van Oest and George Knox
-
Customer Complaints and Recovery Effectiveness: A Customer Base Approach
By George Knox and Rutger Van Oest
-
By Kinshuk Jerath, Peter Fader, ...
-
Generalizing Latent Attrition Models for Multi-Activity Customer Base Analysis
By David A. Schweidel, Young-hoon Park, ...
-
The Need for Market Segmentation in Buy-Till-You-Defect Models
By Evsen Korkmaz, D. Fok, ...