Integrated Approach of RFM, Clustering, CLTV & Machine Learning Algorithms for Forecasting

CLTV is a customer relationship management (CRM) issue with an enterprise approach to understanding and influencing customer behavior through meaningful communication to improve customer acquisition, customer retention, customer loyalty, and customer profitability. The whole idea is that, business wants to predict the average amount of $$ customers will spend on the business over the entire life of relationship. Although statistical methods can be very powerful, but these methods make several stringent assumptions on the types of data and their distribution, and typically can only handle a limited number of variables. Regression-based methods are usually based on a fixed-form equation, and assume a single best solution, which means that we can compare only a few alternative solutions manually. Further, when the models are applied to real data, the key assumptions of the methods are often violated.