A Stochastic Approach for Valuing Customers

  • Mohammadjafar Tarokh Strategic Intelligence Laboratory, Industrial Engineering Department K.N. Toosi University of Technology Tehran, Iran
  • Mahsa EsmaeiliGookeh PHD Candidate Strategic Intelligence Laboratory, Industrial Engineering Department K.N. Toosi University of Technology
Keywords: customer, Markov chain model, data mining, future value, present value, customer behavior

Abstract

The present study attempts to develop a new model for computing customer lifetime value. The customer lifetime value defined in this paper is the combination of present value and future value. As an innovation the CLV modeling of this paper is based on customer behavior modeling, done by data mining techniques. By extracting the profit vector related to each type of customer behavior, calculation of present study was done, then by utilizing Markov chain model we predict future value and count customer lifetime value. A new churn model was contributed by authors to manage unprofitable CRM costs; utilizing this churn model, the proposed CLV model can cause more profitability for the enterprise. The new CLV model of this paper was validated by historical customer data of a composite manufacturing company.

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Author Biographies

Mohammadjafar Tarokh, Strategic Intelligence Laboratory, Industrial Engineering Department K.N. Toosi University of Technology Tehran, Iran

Dr Mohammad Jafar Tarokh is a professor at Strategic Intelligence Laboratory in industrial engineering department of K. N. Toosi University of Technology in Tehran. He received his B.Sc. from Sharif University, M.Sc. from University of Dundee in UK and Ph.D. from University of Bradford, UK. His main research interests are in business intelligence, customer relationship management, supply chain management, and knowledge management.

Mahsa EsmaeiliGookeh, PHD Candidate Strategic Intelligence Laboratory, Industrial Engineering Department K.N. Toosi University of Technology

Mahsa EsmaeiliGookeh is a Ph.D. candidate in IT engineering in K. N. Toosi University of Technology in Tehran. She received her B.Sc. from AmirKabir University of Technology, and M.Sc from K. N. Toosi University of Technology Both in IT engineering field of study. Now she is working on customer lifetime value modeling and is intrested in CRM, BPR and data analysis.

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A Stochastic Approach for Valuing Customers
Published
2018-02-17
How to Cite
Tarokh, M., & EsmaeiliGookeh, M. (2018, February 17). A Stochastic Approach for Valuing Customers. International Journal of Information & Communication Technology Research, 9(3), 59-66. Retrieved from http://journal.itrc.ac.ir/index.php/ijictr/article/view/310
Section
Information Technology