Customer Lifetime Value Modeling In Semi-contractual Setting

How to measure CLV is a very active research point in marketing science for years. Previously, almost all the CLV measuring model studies are under non-contractual transaction setting or contractual transaction setting, while just one study is done in the setting of semi-contractual transaction in2008. In this paper, we deal with a special type in semi-contractual transaction setting, in which firms can unilaterally terminate transaction relationship with customers under certain conditions, resulting in artificial truncated customers’survival duration. Our CLV model consists of two sub-models:the customer base analysis (CBA) model and the monetary value (MA) model. In the CBA model, based on BG/BB model and combined with "artificial truncated" feature, we innovatively propose BG-t/BB model. In the MA model, we adopt the classical Gamma-Gamma model. Integrated with two models, we construct the CLV model. The empirical results from the telecommunication industry show that both the CBA model and the CLV model achieve good prediction effects. Moreover, we also simulate the variation trend of customer equity under different truncated duration, so as to help firms to find the optimal truncated duration.This paper is supported by a grant from National Natural Science Foundation of China:The Research of Customer Lifetime Value Modeling in Semi-contractual Setting and Marketing Decision (NO.71171023).