CONCEPT OF THE MONTH

CLV has a language of its own, with numerous words, phrases, acronyms, initialisms, and abbreviations. Learn to speak and understand it one concept at a time. This month’s featured concept:

Buy Till You Die (BTYD)

While the name sounds like a life-threatening shopping obsession, Buy Till You Die (BTYD) is actually a class of statistical models. These models are designed to capture the behavioral characteristics of non-contractual customers until they “die” — or, more accurately, until they become inactive.

BTYD models estimate the purchasing behavior of a customer through two stochastic (having a random probability distribution or pattern that may be analyzed statistically but may not be predicted precisely) processes:

• Repeat purchase, which explains how frequently customers make purchases while they are still “alive”
• Dropout process, which models how likely a customer is to churn in any given time period

Why is this important? The primary purpose of BTYD models is to forecast customer lifetime value (CLV). CLV helps companies identify their highest-value customers, which are those that will spend the most on business or products over their lifetime with a company.

Since customer centricity is largely about retaining and acquiring these high-value customers, understanding BTYD models (at least at a high level) is critical to being a customer-centric company.

For more insight, check out the research paper CLV: More Than Meets the Eye. Learn more customer-centricity and CLV concepts in Theta’s Glossary.