Application of Dynamic Programming Method to Marketing Decisions Based on Customer Database

Zhao Zhongqiu (), Li Xiaofei (), Ma Baolong () and Li Jinlin ()
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Zhao Zhongqiu: School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China
Li Xiaofei: School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China
Ma Baolong: School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China
Li Jinlin: School of Management and Economics, Beijing Institute of Technology, Beijing, 100081, China

Journal of Systems Science and Information, 2016, vol. 4, issue 2, 169-176

Abstract: The paper focuses on modeling longitudinal customer behavior and develops a dynamic programming (DP) to show how customer transaction database may be used to guide marketing decisions such as pricing and the design of customer reward programs. Dynamic programming is not as a tool to marketing decisions making in this research but rather as a description of consumer behavior. The results show that the method provides a means for evaluating the effectiveness of marketing strategy, for example, customer reward programs. Moreover, the findings from the model estimation indicate that reward program can actually increase the customer’s purchase level and stimulate the repeat purchase behavior.

Keywords: dynamic programming (DP); customer reward programs; marketing decisions; customer behavior (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:jossai:v:4:y:2016:i:2:p:169-176:n:5

DOI: 10.21078/JSSI-2016-169-08

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