Managing Customer Acquisition Risk Using Co-operative Databases

Hongju Liu, Joseph Pancras and Malcolm Houtz

Journal of Interactive Marketing, 2015, vol. 29, issue C, 39-56

Abstract: Acquisition of new customers involves both opportunity and risk, and it is important for firms to predict and manage the risks involved in customer acquisition. Despite its importance, the management of customer acquisition risk has not been the subject of much academic research. This paper develops a framework for firms to manage customer acquisition risk using co-operative databases. We illustrate this framework in the context of the optimal selection of customers for direct mail with a ‘buy now, pay later’ payment option when the acquisition risk manifests as bad debt risk. Using data from a large scale direct marketing campaign, we show that our empirical model that incorporates bad debt risk substantially outperforms suboptimal targeting schemes that overlook bad debt risk. We also demonstrate how alleviating bad debt risk is one beneficial outcome of a fairly recent trend in database marketing, namely the emergence of co-operative databases.

Keywords: Customer acquisition; Acquisition risk; Bad debt risk; Co-operative database; Direct mail; Direct marketing; Targeting (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1094996814000474
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:joinma:v:29:y:2015:i:c:p:39-56

DOI: 10.1016/j.intmar.2014.09.002

Access Statistics for this article

Journal of Interactive Marketing is currently edited by B. T. Ratchford

More articles in Journal of Interactive Marketing from Elsevier
Bibliographic data for series maintained by Catherine Liu ().