TY - JOUR
T1 - Simple computing of the customer lifetime value
T2 - A fixed local-optimal policy approach
AU - Clempner, Julio B.
AU - Poznyak, Alexander S.
N1 - Publisher Copyright:
© 2014, Systems Engineering Society of China and Springer-Verlag Berlin Heidelberg.
PY - 2014/12
Y1 - 2014/12
N2 - In this paper, we present a new method for finding a fixed local-optimal policy for computing the customer lifetime value. The method is developed for a class of ergodic controllable finite Markov chains. We propose an approach based on a non-converging state-value function that fluctuates (increases and decreases) between states of the dynamic process. We prove that it is possible to represent that function in a recursive format using a one-step-ahead fixed-optimal policy. Then, we provide an analytical formula for the numerical realization of the fixed local-optimal strategy. We also present a second approach based on linear programming, to solve the same problem, that implement the c-variable method for making the problem computationally tractable. At the end, we show that these two approaches are related: after a finite number of iterations our proposed approach converges to same result as the linear programming method. We also present a non-traditional approach for ergodicity verification. The validity of the proposed methods is successfully demonstrated theoretically and, by simulated credit-card marketing experiments computing the customer lifetime value for both an optimization and a game theory approach.
AB - In this paper, we present a new method for finding a fixed local-optimal policy for computing the customer lifetime value. The method is developed for a class of ergodic controllable finite Markov chains. We propose an approach based on a non-converging state-value function that fluctuates (increases and decreases) between states of the dynamic process. We prove that it is possible to represent that function in a recursive format using a one-step-ahead fixed-optimal policy. Then, we provide an analytical formula for the numerical realization of the fixed local-optimal strategy. We also present a second approach based on linear programming, to solve the same problem, that implement the c-variable method for making the problem computationally tractable. At the end, we show that these two approaches are related: after a finite number of iterations our proposed approach converges to same result as the linear programming method. We also present a non-traditional approach for ergodicity verification. The validity of the proposed methods is successfully demonstrated theoretically and, by simulated credit-card marketing experiments computing the customer lifetime value for both an optimization and a game theory approach.
KW - Customer lifetime value
KW - Optimization
KW - asynchronous games
KW - ergodic controllable Markov chains
KW - linear programming
KW - optimal policy method
UR - http://www.scopus.com/inward/record.url?scp=84925492230&partnerID=8YFLogxK
U2 - 10.1007/s11518-014-5260-y
DO - 10.1007/s11518-014-5260-y
M3 - Artículo
SN - 1004-3756
VL - 23
SP - 439
EP - 459
JO - Journal of Systems Science and Systems Engineering
JF - Journal of Systems Science and Systems Engineering
IS - 4
ER -