The customer loyalty model in Example 16.7 assumes that once a customer leaves (becomes disloyal), that customer never becomes loyal again. Assume instead that there are two probabilities that drive the model, the retention rate and the rejoin rate, with values 0.75 and 0.15, respectively. The simulation should follow a customer who starts as a loyal customer in year 1.
From then on, at the end of any year when the customer was loyal, this customer remains loyal for the next year with probability equal to the retention rate. But at the end of any year the customer is disloyal, this customer becomes loyal the next year with probability equal to the rejoin rate. During the customer’s nth loyal year with the company, the company’s mean profit from this customer is the nth value in the mean profit list in column B. Keep track of the same two outputs as in the example, and also keep track of the number of times the customer rejoins.

  • CreatedApril 01, 2015
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