The 2003 ISMS Practice Prize Winner: Optimizing Rhenania's Direct Marketing Business Through Dynamic Multilevel Modeling (DMLM) in a Multicatalog-Brand Environment

Ralf Elsner (), Manfred Krafft () and Arnd Huchzermeier ()
Additional contact information
Ralf Elsner: Rhenania Group, 56061 Koblenz, Germany
Manfred Krafft: University of Muenster, Am Stadtgraben 13-15, 48143 Muenster, Germany
Arnd Huchzermeier: WHU, Otto-Beisheim Graduate School of Management, Burgplatz 2, 56179 Vallendar, Germany

Marketing Science, 2004, vol. 23, issue 2, 192-206

Abstract: We introduce Dynamic Multilevel Modeling (DMLM) to a multicatalog-brand environment to determine the optimal frequency, size, and customer segmentation of direct marketing activities. This optimization method leverages multicatalog-brand effects including the utilization of prior customer ordering behavior, maximization of customer value and customer share, and economies of scale and scope in printing and mailing. This enhancement of the original DMLM-approach is called Dynamic Multidimensional Marketing (DMDM). With DMLM alone, Rhenania, a German direct mail order company, turned its catalog mailing practices around and consequently rose from the number 5 to the number 2 market position. The DMLM approach was so effective that two major competitors could be bought out. Improvements provided by DMDM were threefold: more efficient resource allocation across all catalog brands, more accurate customer microsegmentation, and more effective reactivation. Presently, the company's target is to transform single-brand customer relationships into two- or three-brand relationships with higher revenue per customer. As a consequence, the Rhenania group's performance was decoupled from the overall market trend.

Keywords: customer value analysis; database marketing; direct marketing; dynamic investment analysis; mail-order business; managerial decision making; Markov processes (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.1040.0063 (application/pdf)

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:inm:ormksc:v:23:y:2004:i:2:p:192-206

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().