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Predicting e-Customer behavior in B2C Relationships for CLV model

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Author(s): Kaveh Ahmadi

Journal: International Journal of Business Research and Management
ISSN 2180-2165

Volume: 2;
Issue: 3;
Start page: 128;
Date: 2011;
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Keywords: Customer Lifetime Value (CLV) | e-Commerce Relationships | Net Present Value (NPV) | customer's behavior.

ABSTRACT
E-Commerce sales have demonstrated an amazing growth in the last few years. And it is thusclear that the web is becoming an increasingly important channel and companies should strive fora successful web site. In this completion knowing e-customer and predicting his behavior is veryimportant. In this paper we describe e-customer behavior in B2C relationships and then accordingto this behavior a new model for evaluating e-customer in B2C e-commerce relationships will bedescribed. The most important thing in our e-CLV (Electronic Customer Lifetime Value) model isconsidering market's risks that are affecting customer cash flow in future. A lot of CLV models arebased on simple NPV (simple net present value). However simple NPV can assess a good valuefor CLV, but simple NPV ignores two important aspects of B2C e-relationship which are marketrisks and big amount of customer data in e-commerce context. Therefore, simple NPV isn'tenough for assessing e-CLV in high risk B2C markets. Instead of NPV, real option analyses couldlead us to a better estimation for future cash flow of customers. With real option analyses, wepredict all the future states with probability of each of them. And then calculate the more accurateof future customer cash flow. In this paper after a brief history of CLV, we explain customerbehavior in B2C markets especially for e-retailers. Then with using real option analyses, weintroduce our CLV model. Two extended examples explain our model and introduce the steps infinding CLV of customer in a B2C relationship.
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