Customer Lifetime Value under Complex Contract Structures
We analyze the problem of calculating the customer lifetime value (CLV) under contract structures that have an impact on customer dynamics. Typical examples are minimum contract durations, or fixed time points for contract cancellation. We show that classical Markov Chain models are not appropriate and may lead to large errors in the CLV. We propose a Semi-Markov formulation which leads to substantially better results.
KeywordsMarketing customer lifetime value Markov Chain Models Semi-Markov models
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