Publications
Publications
- 2023
- HBS Working Paper Series
The Customer Journey as a Source of Information
By: Nicolas Padilla, Eva Ascarza and Oded Netzer
Abstract
In the face of heightened data privacy concerns and diminishing third-party data access,
firms are placing increased emphasis on first-party data (1PD) for marketing decisions.
However, in environments with infrequent purchases, reliance on past purchases 1PD can
pose a challenge in fully harnessing this data. We address these challenges by introducing
a probabilistic machine learning model that fuses customer click-stream data, and, when
available, purchase data, within and across journeys. Combining data across journeys can
be challenging if customers have different needs in different journeys. We account for such
“context heterogeneity”, using a Bayesian non-parametric Pitman-Yor process. Drawing
from within-journey, past journeys, and cross-customer behaviors, our model offers a
solution to the “cold start problem,” enabling firms to predict customer preferences even
in the absence of prior interactions. Notably, the model allows for continuous updating
of the inferred preferences as the customer keeps interacting with the firm. We apply
the model to data from an online travel platform, revealing the substantial benefits of
consolidating 1PD from both current and previous customer journeys. In scenarios with
restricted access to customers’ historical data collected via cookies, our model suggests
that within-journey data can help offset the loss of historical customer data.
Keywords
Customer Journey; Privacy; Consumer Behavior; Analytics and Data Science; AI and Machine Learning; Customer Focus and Relationships
Citation
Padilla, Nicolas, Eva Ascarza, and Oded Netzer. "The Customer Journey as a Source of Information." Harvard Business School Working Paper, No. 24-035, October 2023. (Revised October 2023.)