Data mining framework for customer lifetime value-based segmentation

Abstract

Estimating Customer Lifetime Value (CLV) is essential for firms competing in data-rich environments. Segmentation on the basis of CLV is helpful in customization of products and services by justification of resource allocation. Model-based automated decision making is likely to penetrate various marketing decision-making environments. We are presenting a framework for customer lifetime value-based segmentation. The framework automates two decisions: first, selection of variables; and second creation of optimal segments on the basis of CLV. The framework uses clustering for segmentation and genetic algorithm for optimization.© 2012 Macmillan Publishers Ltd.