Buy Till you Die

The Buy Till You Die (BTYD) class of statistical models are designed to capture the behavioral characteristics of non-contractual customers, or when the company is not able to directly observe when a customer stops being a customer of a brand.[1] The goal is typically to model and forecast customer lifetime value.

BTYD models all jointly model two processes: (1) a repeat purchase process, that explains how frequently customers make purchases while they are still "alive"; and (2) a dropout process, which models how likely a customer is to churn in any given time period.[2][3]

Common versions of the BTYD model include:

The Pareto/NBD model, which models the dropout process as a Pareto Type II distribution and the purchase frequency process as a negative binomial distribution[2]
The Beta-Geometric/NBD model, which models the dropout process as a geometric distribution with a beta mixing distribution, and models the purchase frequency process as a negative binomial distribution.[2]

The concept was firstly introduced in 1987, in an article in Management Science,[4] which concerns on counting and identifying those customers who are still active.

References

McCarthy, Daniel. "Buy 'Til You Die - A Walkthrough" (PDF). Buy ’Til You Die - A Walkthrough. Retrieved 21 March 2019.
Fader; et al. (Spring 2005). ""Counting Your Customers" the Easy Way: An Alternative to the Pareto/NBD Model" (PDF). Marketing Science. 24 (2): 275–284. doi:10.1287/mksc.1040.0098. Retrieved 21 March 2019.
Fader; et al. (November–December 2010). "Customer-Base Analysis in a Discrete-Time Noncontractual Setting" (PDF). Marketing Science. 29 (6): 1086–1108. doi:10.1287/mksc.1100.0580. Retrieved 21 March 2019.
Schmittlein, David; Morrison, Donald; Colombo, Richard. "Counting Your Customers: Who-Are They and What Will They Do Next?". Management Science. 33 (1): 1–24. doi:10.1287/mnsc.33.1.1.

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[BTYD_Walkthrough-1] McCarthy, Daniel. "Buy 'Til You Die - A Walkthrough" (PDF). Buy ’Til You Die - A Walkthrough. Retrieved 21 March 2019.

[Fader_2005-2] Fader; et al. (Spring 2005). ""Counting Your Customers" the Easy Way: An Alternative to the Pareto/NBD Model" (PDF). Marketing Science. 24 (2): 275–284. doi:10.1287/mksc.1040.0098. Retrieved 21 March 2019.

[Fader_et_al_2010-3] Fader; et al. (November–December 2010). "Customer-Base Analysis in a Discrete-Time Noncontractual Setting" (PDF). Marketing Science. 29 (6): 1086–1108. doi:10.1287/mksc.1100.0580. Retrieved 21 March 2019.

[4] Schmittlein, David; Morrison, Donald; Colombo, Richard. "Counting Your Customers: Who-Are They and What Will They Do Next?". Management Science. 33 (1): 1–24. doi:10.1287/mnsc.33.1.1.