Customer equity & lifetime management (CELM)

Drawing on deep industry expertise and advanced analytics, we have developed the Customer Equity and Lifetime Management (CELM) solution, which allows us to model customer lifetime value (LTV) and risk (volatility) effectively, and, most importantly, to optimally select and schedule series of marketing actions (e.g. campaigns) to maximize the customer value/risk ratio over variable time horizons (e.g. weeks, months, quarters) using historical customer data.

The IBM CELM solution goes beyond traditional segmentation and campaign management systems., which usually focus on using demographic and transactional customer features for segmentation and targeting. Although existing campaign optimization systems have made significant progress in terms of analytics capabilities, most of them still perform optimization campaign by campaign, whereas marketers are usually interested in knowing the most relevant campaign plan (i.e. portfolio of campaigns) to address a specific customer profile.

The CELM solution focuses on optimizing the planning and budgeting of the portfolio of marketing actions to maximize both the value and the loyalty of customers over time. Advanced stochastic optimization algorithms such as Markov decision processes (MDPs) and portfolio optimization techniques are carefully designed to model the relationship with each customer profile and to derive the optimal marketing actions, timings, and budgets that are most likely to transition customers to higher value and loyalty states.

To achieve such optimization, the CELM solution is built upon several steps:

• Introduce advanced value/loyalty metrics and enhance existing segmentations;
• Identify customers’ different lifecycle phases and dynamics (e.g. track the value of a family),
• Estimate customer lifetime value and risk (volatility) over variable time horizons,
• Optimize planning of sequences of campaigns per segment (avoid saturation!),
• Optimize marketing budget allocation to maximize the value/volatility ratio.

CELM has already provided several IBM customers with innovative ways to support their marketing and loyalty schemes by optimizing their marketing planning and budgeting and by focusing on customer value and loyalty.

CELM provides various customer lifecycle models and the optimal marketing plans that are most likely to move customers into higher value and loyalty states.