Management Science | January 2008
risk of defection from the firm for each customer. The data come from a membership-based direct marketing
company where the times of each customer joining the membership and terminating it are known once these events happen. In addition, there is an uncertain relationship between customer lifetime and purchase behavior.
Therefore, longer customer lifetime does not necessarily imply higher customer lifetime value.
We compare the performance of our model with other models on a separate validation data set. The models compared are the extended NBD–Pareto model, the recency, frequency, and monetary value model, two models nested in our proposed model, and a heuristic model that takes the average customer lifetime, the average
interpurchase time, and the average dollar purchase amount observed in our estimation sample and uses them to predict the present value of future customer revenues at each purchase occasion in our hold-out sample. The
results show that our model performs better than all the other models compared both at predicting customer lifetime value and in targeting valuable customers. The results also show that longer interpurchase times are associated with larger purchase amounts and a greater risk of leaving the firm. Both male and female customers seem to have similar interpurchase time intervals and risk of leaving; however, female customers spend less
compared with male customers.
Siddharth Shekhar Singh is an Associate Professor of Marketing at the Indian School of Business (ISB). He previously served as Senior Associate Dean (Admissions and Financial Aid), Associate Dean (Digital Transformation, eLearning, and Marketing; and RCI Outreach and Engagement), and was the first Director of the Doctoral Programme at ISB. He is a member of the Board of Directors of DLabs, a technology business incubator of ISB. He also serves as an Independent Director on the Board of Directors of Petronet LNG Limited and the International Schools of Business Management (ISBM—a UK-based charity). He holds a PhD in Marketing from the J. L. Kellogg School of Management, Northwestern University (USA), an MBA in Marketing and Finance from the University of Illinois at Urbana-Champaign (USA), and a BTech in Electronics & Communications Engineering from the Indian Institute of Technology, Banaras Hindu University (India).
Professor Singh’s research broadly focuses on a firm’s ability to achieve sustainable competitive advantage. His work attempts to help firms identify the “right” customers for acquisition and retention, and more profitably manage relationships with them over time. He researches marketing initiatives such as customer engagement, customer loyalty programs, and online customer communities. He also works on issues related to the online training of salespersons, the development of financial metrics to evaluate marketing decisions (e.g., customer lifetime value), customer segmentation, purchases, returns, and marketing analytics.
Professor Singh has co-authored four textbooks for MBA students and business executives. The books—titled Managing Marketing: An Applied Approach, Managing Marketing: A Concise Approach, Essentials of Managing Marketing, and Digital Marketing: Strategy & Tactics—are published by Wiley India.
Because of his rare combination of academic rigour and real-world business experience, he is an in-demand columnist and speaker whose expert commentary has appeared in globally prestigious print and broadcast outlets, including CNN-News18, NDTV, CNN Money, Forbes India, Fortune India, The Economic Times, The Times of India, Business Today, The Hindu, Livemint, Businessworld, and others. He also publishes in distinguished academic journals such as Marketing Science, Management Science, Journal of Marketing Research, Quantitative Marketing and Economics, and the Journal of Service Research.
Professor Singh has a keen interest in new ventures. He has been teaching the New Product Development and Marketing course for the past 18 years in both India and the USA. He is a co-founder and strategic advisor at Bsharp Sales Enablers Pvt. Ltd. He advises numerous startups and regularly participates in various capacities (e.g., juror and speaker) at startup events.
Prior to his PhD, he worked for several years with Johnson & Johnson (J&J) in product and sales management roles. Hired through J&J’s prestigious global leadership development program—the IRDP—his responsibilities included managing several product lines and launching new products for J&J hospital products group in India. His consulting experience includes firms in a variety of industries such as consumer products and services, healthcare, agriculture, media, high technology, and retail.
