Date of Award

7-31-2015

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Marketing

First Advisor

V. Kumar

Second Advisor

Yi Zhao

Third Advisor

Denish Shah

Fourth Advisor

Robert P. Leone

Abstract

In this study, we propose a flexible framework to assess Customer Lifetime Value (CLV) in the Consumer Packaged Goods (CPG) context. We address the substantive and modeling challenges that arise in this setting, namely (a) multiple-discreteness, (b) brand-switching, and (c) budget constrained consumption. Using a Bayesian estimation, we are also able to infer the consumer’s latent budgetary constraint using only transaction information, thus enabling managers to understand the customer’s budgetary constraint without having to survey or depend on aggregate measures of budget constraints. Using the proposed framework, CPG manufacturers can assess CLV at the focal brand-level as well as at the category-level, a departure from CLV literature which has mostly been firm-centric. We implement the proposed model on panel data in the carbonated beverages category and showcase the benefits of the proposed model over simpler heuristics as well as conventional CLV approaches. Finally, we conduct two policy simulations describing the role of the budget constraint on CLV as well as the asymmetric effects of pricing in this setting and develop managerial insights in this context.

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