Are Revived Customers as Good as New?

Abstract

Customers come and go, and some return. Is their behavior the same, better or worse when they return? To answer this we first define revived customers in a non-contractual setting. Next, we compare the purchasing behavior of revived customers before and after the period of inactivity. The Customer Lifetime Value (CLV) models in the targeting literature make the implicit assumption that the buying behavior of revived customers is the same as the buying behavior of active customers (Equality Assumption). The third objective of our study is to investigate whether this assumption holds or not. For our analyses, we use an extended Pareto/NBD model. We have three main findings from our study. First, we find that revived customers exist in non-contractual settings. Second, we show that higher past purchase frequency (strongly habitual) customers have greater consistency in purchasing behavior than lower past purchase frequency (weakly habitual) customers. The final key finding is that the equality assumption is not valid for, i.e., revived customers have different purchasing behavior than active customers.