A joint model of customers' attrition, transaction, and spending process in non-contractual business settings

06.10.2023 11:15 – 12:15

RESEARCH CENTER FOR STATISTICS SEMINAR / ABSTRACT

Modeling customer purchases is a complex task, particularly in retail and other non-contractual business settings. Often, the focus is on capturing three processes, i.e., customers' attrition, transaction, and spending behavior. The latter is generally modeled independently of the other two processes. In the literature, this approach has regularly been challenged. However, no joint modeling approach has yet been proposed that provides comparable flexibility, robustness, and accessibility to current practices. In this talk, we present a novel probabilistic model, that combines all 3 processes, while still admitting a closed-form likelihood. The new model can thus be estimated efficiently, is flexible, and even allows for the inclusion of time-invariant and time-varying covariates. While benchmarking with real-world data from the retailing industry is still ongoing, we give some insights into the improved performance of our model in predicting customer behavior.

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