Customer lifetime value model in an online toy store

Authors

1 Postgraduate student, IT Group, Dep. of Industrial Engineering, K.N. Toosi University of Technology, Tehran, Iran

2 Associate Professor, IT Group, Dep. of Industrial Engineering, K.N. Toosi University of Technology, Tehran, Iran

Abstract

Business all around the world uses different approaches to know their customers, segment them and formulate suitable strategies for them. One of these approaches is calculating the value of each customer for the company. In this paper by calculating Customer Lifetime Value (CLV) for individual customers of an online toy store named Alakdolak, three customer segments are extracted. The level of profitability for customers is identified, and finally suitable marketing strategies for each segment are developed. The results indicate that the company should increase its low price products and develop special programs for those that buy high price products and have high loyalty. Logistic regression as a data mining technique is used to present the customer defection and future purchase probability models and for each model, verification and validation is done.

Keywords