A Simplified and Numerically Stable Approach to the BG/NBD Churn Prediction model

Dylan Zammit; Christopher Zerafa

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arXiv · 2502.12912

A Simplified and Numerically Stable Approach to the BG/NBD Churn Prediction model

Dylan Zammit·Christopher Zerafa

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Abstract

This study extends the BG/NBD churn probability model, addressing its limitations in industries where customer behaviour is often influenced by seasonal events and possibly high purchase counts. We propose a modified definition of churn, considering a customer to have churned if they make no purchases within M days. Our contribution is twofold: First, we simplify the general equation for the specific case of zero purchases within M days. Second, we derive an alternative expression using numerical techniques to mitigate numerical overflow or underflow issues. This approach provides a more practical and robust method for predicting customer churn in industries with irregular purchase patterns.

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Dylan Zammit, Christopher Zerafa. 2025-02-18. A Simplified and Numerically Stable Approach to the BG/NBD Churn Prediction model. https://arxiv.org/abs/2502.12912

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