Non-parametric estimation of mean customer lifetime value

Phillip E. Pfeifer, Heejung Bang

Research output: Contribution to journalArticle

23 Scopus citations

Abstract

This paper is about how to use data from a random sample of customer relationships to calculate an appropriate average customer lifetime value (CLV). When the sample contains only completed relationships, the simple unweighted average is appropriate. When the sample contains a mix of active and completed relationships, the lifetimes of the active relationships are said to be right censored because the observed lifetime to date is but a lower bound on the eventual lifetime. Because of this censoring, a simple average of the sample CLVs to date will be a biased estimate of the mean CLV. This paper presents and explores several non-parametric estimation methods for correcting for this bias.

Original languageEnglish (US)
Pages (from-to)48-66
Number of pages19
JournalJournal of Interactive Marketing
Volume19
Issue number4
DOIs
StatePublished - Sep 2005
Externally publishedYes

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

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