Buy Till you Die explained

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
• 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.

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.

Notes and References

1. Web site: McCarthy . Daniel . Buy ’Til You Die - A Walkthrough . Buy ’Til You Die - A Walkthrough . 21 March 2019.
2. Fader . et al . "Counting Your Customers" the Easy Way: An Alternative to the Pareto/NBD Model . Marketing Science . Spring 2005 . 24 . 2 . 275–284 . 21 March 2019 . 10.1287/mksc.1040.0098.
3. Fader . et al . Customer-Base Analysis in a Discrete-Time Noncontractual Setting . Marketing Science . November–December 2010 . 29 . 6 . 1086–1108 . 21 March 2019 . 10.1287/mksc.1100.0580.
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 . 10.1287/mnsc.33.1.1.