Instant Customer Base Analysis:Managerial Heuristics Often “Get ItRight”

Recently, academics have shown interest and enthusiasm in the development and implementation of stochasticcustomer base analysis models, such as the Pareto/NBD model and the BG/NBD model. Using the informationthese models provide, customer managers should be able to (1) distinguish active customers from inactivecustomers, (2) generate transaction forecasts for individual customers and determine future best customers, and(3) predict the purchase volume of the entire customer base. However, there is also a growing frustration amongacademics insofar as these models have not found their way into wide managerial application. To presentarguments in favor of or against the use of these models in practice, the authors compare the quality of thesemodels when applied to managerial decision making with the simple heuristics that firms typically use.[...]