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Predicting Customer Lifetime Value --- 2008 DMEF Customer Lifetime Value Modeling Competition (Task 2)

Jamal, Zainab; Zhang, Alex
HP Laboratories


Keyword(s): Lifetime value (LTV); Logit models; Linear models; Regression Tree; Recency, Frequency, and Monetary (RFM).

Abstract: We describe the 2008 DMEF (Direct Marketing Educational Foundation) Customer Lifetime Value Modeling Competition, which the HP Labs team consisting of Zainab Jamal and Alex Zhang won Task 2 (out of 3 tasks). We present our approach for predicting individual donor's total gift amount over a two-year target period. We divide the donors into 8 segments; for each segment, we fit a logit model for predicting the probability of giving, and a log-linear model for predicting the amount of gifts conditional on a donor giving. We found that recency, frequency, and first gift amount are good predictors of the probability of giving, while time-weighted total gift amount in the past years is a good predictor for future gift amount.

11 Pages

Additional Publication Information: To be published in Journal of Interactive Marketing, Vol 23, 2009.

External Posting Date: September 6, 2009 [Fulltext]. Approved for External Publication
Internal Posting Date: September 6, 2009 [Fulltext]

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