Customer migration, campaign budgeting, revenue estimation: the elasticity of Markov decision process on customer lifetime value
Customer migration, campaign budgeting, revenue estimation: the elasticity of Markov decision process on customer lifetime value
To predict the profitability of a customer, today’s firms have to practice Customer Lifetime Value (CLV) computation. Different approaches are proposed in the last ten years to analyze the complex customer phenomenon. One of them is Markov Decision Process (MDP) model. The class of Markov Models is an effective and a flexibility decision model. Whereas the use of MDP model is limited by its assumption, in this paper, we attempt to introduce an extension model for MDP: Higher-order Markov Decision Model (HMDP). HMDP can perform excellently in CLV calculation and overcome the limitation of MDP. By using a real application, we will demonstrate how it can be used efficiently in a firm’s daily operations.
customer lifetime value, higher-order markov decision process
65-80
Ching, W.K.
cd5eec0a-5a2b-4ec3-b588-a5db59f5fe8f
Ng, M.K.
a9816f6a-e461-4924-9b22-df9f97af2594
So, M.C.
c6922ccf-547b-485e-8b74-a9271e6225a2
1 May 2004
Ching, W.K.
cd5eec0a-5a2b-4ec3-b588-a5db59f5fe8f
Ng, M.K.
a9816f6a-e461-4924-9b22-df9f97af2594
So, M.C.
c6922ccf-547b-485e-8b74-a9271e6225a2
Ching, W.K., Ng, M.K. and So, M.C.
(2004)
Customer migration, campaign budgeting, revenue estimation: the elasticity of Markov decision process on customer lifetime value.
Advanced Modeling and Optimization, 6 (2), .
Abstract
To predict the profitability of a customer, today’s firms have to practice Customer Lifetime Value (CLV) computation. Different approaches are proposed in the last ten years to analyze the complex customer phenomenon. One of them is Markov Decision Process (MDP) model. The class of Markov Models is an effective and a flexibility decision model. Whereas the use of MDP model is limited by its assumption, in this paper, we attempt to introduce an extension model for MDP: Higher-order Markov Decision Model (HMDP). HMDP can perform excellently in CLV calculation and overcome the limitation of MDP. By using a real application, we will demonstrate how it can be used efficiently in a firm’s daily operations.
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Published date: 1 May 2004
Keywords:
customer lifetime value, higher-order markov decision process
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Local EPrints ID: 180723
URI: http://eprints.soton.ac.uk/id/eprint/180723
ISSN: 1841-4311
PURE UUID: 42ebafdb-5de6-4854-8c9c-95044e2d779f
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Date deposited: 14 Apr 2011 11:36
Last modified: 11 Dec 2021 04:16
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Author:
W.K. Ching
Author:
M.K. Ng
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