An Approach to Customer Behavior Modeling using Markov Decision Process

Abstract

This paper presents an application of Markov Decision Process method for modeling of selected marketing processes. Based on available realistic data, MDP model is constructed. Customer behavior is represented by a set of states of the model with assigned rewards corresponding to the expected return value. Outcoming arcs then represent actions available to the customer in current state. Favourable outcome rate of available actions is then analyzed, with emphasis on suitability of the model for future predictions of customer behavior.