Go to main navigation Navigation menu Skip navigation Home page Search
STOCKHOLM SCHOOL
OF ECONOMICS

Probability Models for Customer Lifetime Value Analysis

Stockholm School of Economics, Center for Retailing, June 3-4, 2024.

Workshop overview

Customer-base analysis seeks to use data from a firm’s customer transaction database to answer forward-looking questions such as: (1) Which individuals are most likely to be active (or inactive) customers in a future period of time? (2) What will the aggregate and disaggregate purchase patterns look like for a group of customers in the future period? (3) What is the “customer lifetime value” (CLV) of those individuals listed in the firm’s database?

While these questions are of great interest to both researchers and analysts, the standard set of statistical tools we are exposed to in our education are not well-suited for providing answers.

This two-day seminar aims to fill in these gaps by bringing researchers and practitioners fully up to speed on the essential techniques that should underlie such customer-base analysis activities. Our two main objectives are: (1) to provide an overview of the basic “building blocks” of probability models that can be used to characterise customer behaviour, and (2) to use these “building blocks” in a series of focused models/examples that illustrate several state-of-the-art approaches towards customer-base analysis (often requiring nothing more than an Excel spreadsheet for complete model implementation). By the end of the seminar, participants will understand the critical concepts and methods required to develop models for customer-base analysis and to make meaningful and accurate statements about CLV in various managerial settings. Likewise, they will be keenly aware of the limitations and concerns of other approaches that are often used for similar purposes.

Hardy-Fader-header.png

Professors Peter Fader (Wharton) and Bruce Hardie (London Business School) will introduce the participants of this two-day workshop to critical concepts and methods required to develop models for customer-base analysis and to understand key components of “customer lifetime value” (CLV). The covered material is somewhat technical, so some basic aptitude with probability/statistics would be beneficial for participants (but no formal programming skills are required – everything covered can be implemented in a spreadsheet). The target audience is both PhD students and marketing academics, as well as marketing analytics professionals who want to better understand these models.

The workshop will be hosted by Center for Retailing at the Stockholm School of Economics and is organized in a way to allow for personal interactions among participants and the faculty. Participation in the workshop is free-of-charge and registration covers the workshop, lunch, and coffee breaks. All attendees must cover their travel and hotel costs. Registration is on a first-come, first-served basis.

About the speakers

Peter S. Fader is the Frances and Pei-Yuan Chia Professor of Marketing at The Wharton School of the University of Pennsylvania. His expertise centers around the analysis of behavioral data to understand and forecast customer shopping/purchasing activities. He works with firms from a wide range of industries, such as telecommunications, financial services, gaming/entertainment, retailing, and pharmaceuticals. Managerial applications focus on topics such as customer relationship management, lifetime value of the customer, and sales forecasting for new products. Much of his research highlights the consistent (but often surprising) behavioral patterns that exist across these industries and other seemingly different domains. In 2017, Professor Fader was named by Advertising Age as one of its inaugural “25 Marketing Technology Trailblazers,” and was the only academic on the list. Peter’s research has appeared in leading academic journals, such as Management Science, Marketing Science, Journal of Marketing Research, Journal of Marketing, Journal of Consumer Research, and the Journal of the American Statistical Association.

Bruce Hardie is Professor of Marketing at London Business School. He holds B.Com and M.Com degrees from the University of Auckland (New Zealand), and MA and PhD degrees from the University of Pennsylvania. His primary research interest lies in the development of data-based models to support marketing analysts and decision makers. Most of his current projects focus on the development of stochastic models of buyer behaviour for customer-base analysis. Bruce’s research has appeared in leading academic journals, such as the Journal of Marketing, Journal of Marketing Research, Marketing Science, The American Statistician, and the European Journal of Operational Research. He serves on the editorial boards of the International Journal of Research in Marketing, Journal of Interactive Marketing, Journal of Marketing, Journal of Retailing, and Marketing Letters.

 

Who should register for this workshop?

This program will benefit both PhD students and marketing academics and as well as mid-level analytics professionals who want to better understand these emerging concepts. The material is somewhat technical, so some basic aptitude with probability/statistics would be beneficial for participants. For instance, it helps (but is by no means required) to have some familiarity with basic probability distributions (such as the Poisson and the binomial), even if the details are largely forgotten. Similarly, participants should be comfortable with Microsoft Excel, they do not need for any advanced capabilities (we will rely exclusively on ordinary “built-in” Excel functions). Finally, participants do not need to bring a laptop — in fact, we actively discourage it. Just bring an open mind, a sharp pencil, and a high level of interest in the subject matter. All materials presented (including the detailed spreadsheets) will be made available to all participants immediately after the seminar.

Readings

One 18-page case study will be distributed before the workshop, and you will need to have read it before the first day.

If you are looking for some additional pre-workshop reading, we recommend

Fader, Peter S., Bruce G. S. Hardie, and Michael Ross (2022), The Customer-Base Audit: The First Step on the Journey to Customer Centricity, Philadelphia, PA: Wharton School Press.

This book focuses on descriptive analyses of buyer behavior. The models we will explore in this workshop are designed to characterize and predict these behaviors.

A list of follow‐up readings will be provided during the course.

Sign-up

Registration for the workshop is now closed.

You are welcome to join the waiting list in case new spots open up. Please contact Alexander Mafael (alexander.mafael@hhs.se) if you would like to join the waiting list.