Recommendation Method for Improving Customer Lifetime Value

It is important for online stores to improve customer lifetime value (LTV) if they are to increase their profits. Conventional recommendation methods suggest items that best coincide with user´s interests to maximize the purchase probability, and this does not necessarily help improve LTV. We present a novel recommendation method that maximizes the probability of the LTV being improved, which can apply to both measured and subscription services. Our method finds frequent purchase patterns among high-LTV users and recommends items for a new user that simulate the found patterns. Using survival analysis techniques, we efficiently find the patterns from log data. Furthermore, we infer a user´s interests from the purchase history based on maximum entropy models and use the interests to improve recommendation. Since a higher LTV is the result of greater user satisfaction, our method benefits users as well as online stores. We evaluate our method using two sets of real log data for measured and subscription services.