Using logistic regression formulation to monitor heterogeneous usage rate for subscription-based services

Authors:
Y. Samimi;A. Aghaie
Affiliations:
Department of Industrial Engineering, K.N. Toosi University of Technology, Tehran, Iran;Department of Industrial Engineering, K.N. Toosi University of Technology, Tehran, Iran
Venue:
Computers and Industrial Engineering
Year:
2011

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Abstract

This paper explores the effect of heterogeneity across different classes of customers as well as their time dependent usage behavior on the purchase rate of multiple services supplied by a subscription-based service provider. It is shown that a suitable model for customer usage pattern based on the logistic regression can effectively be employed to represent both the cross correlation and serially correlation of purchase rate for different kinds of services. Then the deviance statistic is proposed as an appropriate control statistic to simultaneously monitor the usage of multiple services. On the basis of three comparative scenarios, simulation results indicate that the power of the deviance-based control chart is considerably greater than some traditional counterparts like Hotteling's T^2 control chart. Research findings provide promising results for marketing managers and practitioners in terms of both better understanding of the behavior of different classes of customers as well as timely evaluation of investment opportunities that can lead to enhancement of the firm's relationship with customers.