How Shopify Merchants can Measure Retention - Shopify

What this post added

This post introduces the BG/NBD (Beta Geometric / Negative Binomial Distribution) model as a probabilistic approach to defining customer churn and measuring retention for non-contractual businesses. It details the model's parameters (rate of purchasing \(\lambda\), probability of churn event \(p\)), the sufficient statistics required (age, recency, frequency), and the implementation using the lifetimes library in Python with Apache Spark for large-scale merchant data processing. It also discusses the interpretability and limitations of the model, such as its inability to handle seasonal trends or easily incorporate additional customer variables.