Introduction
Customer profitability (CP) is the difference between the revenues earned from the transactions of the customer and the costs associated with the customer relationship during a specified period. CP value is a tool that can be used as a guide for companies while allocating marketing expenditures to customers. It is the best practice for companies to consider customers' future profitability while allocating resources. One of the main strategies to maximize the sum of CPs, which is customer equity, is optimal allocation of marketing resources.
In order to forecast future CP values, it is crucial to understand that customers may...