How to Compute Optimal Catalog Mailing Decisions

Füsun F. Gönül () and Frenkel Ter Hofstede ()
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Füsun F. Gönül: 401 E. Waldheim Road, Pittsburgh, Pennsylvania 15215-1936
Frenkel Ter Hofstede: Department of Marketing, McCombs School of Business, University of Texas at Austin, CBA 7.234/B6700, Austin, Texas 78712

Marketing Science, 2006, vol. 25, issue 1, 65-74

Abstract: We develop, estimate, and test a response model of order timing and order volume decisions of catalog customers and derive a Bayes rule for optimal mailing strategies. The model integrates the and components of the response; incorporates the of the firm; and uses a Bayesian framework to determine the optimal mailing rule for each catalog customer. The we propose for optimal mailing strategy allows for a broad set of objectives to be realized across the time horizon, such as profit maximization, customer retention, and utility maximization with or without risk aversion. We find that optimizing the objective function over multiple periods as opposed to a single period leads to higher expected profits and expected utility. Our results indicate that the cataloguer is well advised to send fewer catalogs than its current practice in order to maximize expected profits and utility.

Keywords: catalog mailing; database marketing; econometric models; hierarchical Bayes (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (23)

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