Marketing Papers
Document Type
Technical Report
Date of this Version
2017
Publication Source
Marketing Science
Volume
36
Issue
2
Start Page
195
Last Page
213
DOI
10.1287/mksc.2016.1007
Abstract
We introduce a new methodology that can capture and explain differences across a series of cohorts of new customers in a repeat-transaction setting. More specifically, this new framework, which we call a vector changepoint model, exploits the underlying regime structure in a sequence of acquired customer cohorts to make predictive statements about new cohorts for which the firm has little or no longitudinal transaction data. To accomplish this, we develop our model within a hierarchical Bayesian framework to uncover evidence of (latent) regime changes for each cohort-level parameter separately, while disentangling cross-cohort changes from calendar-time changes. Calibrating the model using multicohort donation data from a nonprofit organization, we find that holdout predictions for new cohorts using this model have greater accuracy—and greater diagnostic value—compared to a variety of strong benchmarks. Our modeling approach also highlights the perils of pooling data across cohorts without accounting for cross-cohort shifts, thus enabling managers to quantify their uncertainty about potential regime changes and avoid “old data” aggregation bias.
Copyright/Permission Statement
Originally published in Marketing Science © 2017 INFORMS
This is a pre-publication version. The final version is available at http://dx.doi.org/10.1287/mksc.2016.1007
Keywords
changepoint, cross-cohort, hierarchical Bayesian, forecasting, customer-base analysis, customer lifetime value, reversible-jump MCMC
Recommended Citation
Gopalakrishnan, A., Bradlow, E. T., & Fader, P. S. (2017). A Cross-Cohort Changepoint Model for Customer-Base Analysis. Marketing Science, 36 (2), 195-213. http://dx.doi.org/10.1287/mksc.2016.1007
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Business Analytics Commons, Business Intelligence Commons, Management Sciences and Quantitative Methods Commons, Marketing Commons
Date Posted: 15 June 2018
This document has been peer reviewed.