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Customer Lifetime Value under Complex Contract Structures

  • Christoph Heitz
  • Andreas Ruckstuhl
  • Marcel Dettling
Part of the Lecture Notes in Business Information Processing book series (LNBIP, volume 53)

Abstract

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.

Keywords

Marketing customer lifetime value Markov Chain Models Semi-Markov models 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2010

Authors and Affiliations

  • Christoph Heitz
    • 1
    • 2
  • Andreas Ruckstuhl
    • 1
    • 2
  • Marcel Dettling
    • 1
    • 2
  1. 1.Institute of Data Analysis and Process DesignZurich University of Applied SciencesSwitzerland
  2. 2.Swiss Institute of Service Science 

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