Briefs

Israel21c (08/28/05); Hershman, Tania

An Israeli researcher has developed a method to predict which customers will bring in the most value for your company -- whether you are selling physical items, financial services or other goods -- so you can offer them better service and reap even more revenue.

"What we are dealing with is a model for Customer Lifetime Value," says Amit Fisher, a researcher at IBM's Haifa Laboratories. "Normally customer value is calculated by looking at the purchases up til now and assuming that that is what they will carry on doing. It is very simplistic. But you can't assume that what happened in the past is what will happen in the future."

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The site had 10,000 users, which Fisher's technology automatically divided into groups, ten groups in this case, according to customer behavior and other variables, such as those people who put in ten bids and didn't win anything but logged on to the site 100 times, those who won several items that they bid during a one-month period, or people who logged in but didn't bid on anything. He collected data daily for a year, during which time customers made over 70,000 purchases worth over $18 million.

Fisher found that with the most important group, the one containing the largest number of people, he could predict their future behavior almost perfectly. And this can not only provide companies with information, but they can actually improve their revenue by targeting these customers and providing preferential service. A company could also use the method to target the less significant customers and "consider people who haven't made any transactions but can give them the chance to do that," he says.

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