ShiftedBetaGeoModel.expected_retention_elasticity

ShiftedBetaGeoModel.expected_retention_elasticity(data=None, *, discount_rate=0.0)

Compute expected retention elasticity for each customer.

This is the percent increase in expected residual lifetime given a 1% increase in the retention rate, subject to a discount rate for net present value (NPV) calculations. It is recommended to set a discount rate > 0 to avoid infinite retention elasticity estimates.

Adapted from equation (8) in [1].

Parameters:

discount_ratefloat

Discount rate to apply for net present value estimations.

dataDataFrame

Optional dataframe containing the following columns: * customer_id: Unique customer identifier * T: Number of time periods customer has been active * cohort: Customer cohort label * Covariate columns specified in dropout_covariate_cols (if using covariates)

References

[1]

Fader, P. S., & Hardie, B. G. (2010). “Customer-Base Valuation in a Contractual Setting: The Perils of Ignoring Heterogeneity”. Marketing Science, 29(1), 85-93. https://faculty.wharton.upenn.edu/wp-content/uploads/2012/04/Fader_hardie_contractual_mksc_10.pdf