Key points are not available for this paper at this time.
Three customer acquisition scenarios are discussed: first, where prospects’ response behavior varies over their profiles but the offer/creative and customers’ lifetime values (LTV) are assumed fixed and known; second, where the response behavior depends on both profile and creative/offer characteristics with the customers’ LTV still assumed to be fixed; and third, where both response and customer LTV are allowed to vary. Using well-known breakeven analysis principles, the paper presents a simple relationship to determine which prospects should be contracted and then presents statistical models to estimate response and customer value at the individual level. This allows the practical application of the breakeven analysis to each individual prospect. It helps answer the question: should this prospect be invited to become a customer?
Hansotia et al. (Wed,) studied this question.