A Meta-learning based Stacked Regression Approach for Customer Lifetime Value Prediction
This work addresses the need for interpretable CLV prediction models in business domains like e-commerce, though it appears incremental by combining existing methods.
The authors tackled the problem of predicting Customer Lifetime Value (CLV) by proposing a meta-learning-based stacked regression model that combines bagging and boosting predictions, achieving effective and interpretable results as demonstrated on an Online Retail dataset.
Companies across the globe are keen on targeting potential high-value customers in an attempt to expand revenue and this could be achieved only by understanding the customers more. Customer Lifetime Value (CLV) is the total monetary value of transactions/purchases made by a customer with the business over an intended period of time and is used as means to estimate future customer interactions. CLV finds application in a number of distinct business domains such as Banking, Insurance, Online-entertainment, Gaming, and E-Commerce. The existing distribution-based and basic (recency, frequency & monetary) based models face a limitation in terms of handling a wide variety of input features. Moreover, the more advanced Deep learning approaches could be superfluous and add an undesirable element of complexity in certain application areas. We, therefore, propose a system which is able to qualify both as effective, and comprehensive yet simple and interpretable. With that in mind, we develop a meta-learning-based stacked regression model which combines the predictions from bagging and boosting models that each is found to perform well individually. Empirical tests have been carried out on an openly available Online Retail dataset to evaluate various models and show the efficacy of the proposed approach.