The role of lifetime activity cues in customer base analysis

This paper develops the notion of lifetime activity cues in customer base analysis. The authors first discuss the impact of lifetime indicators, such as customers' conceptual response to marketing activities, and then demonstrate how such lifetime cues can be embedded into the Pareto/NBD model. The authors theoretically analyze the implication of this additional behavioral indication on the model's predictions. In an illustrative example, they aim to establish an intuitive understanding of the effects of such information. Evidence from the cellular phone industry supports the relevance of this concept: The empirical study finds a substantial improvement in predictive accuracy in two independent holdout samples. The study concludes with a discussion of the managerial relevance of the proposed approach and opportunities for further research.