Analysing consumer segments to budget for loyalty and promotion programmes and maximize market share

Tsao H-Y, L Pitt () and C Campbell ()
Additional contact information
Tsao H-Y: Takming University of Science and Technology, Taipei
L Pitt: Simon Fraser University
C Campbell: Simon Fraser University

Journal of the Operational Research Society, 2010, vol. 61, issue 10, 1523-1529

Abstract: Abstract This paper seeks to provide a framework and benchmark for the allocation of marketing budget between promotion and loyalty programmes using an approach that combines a Markov-type market share model and the Lagrange multiplier method to maximize market share. The Lagrange multiplier method, that takes into account the market share and the loyalty effect observable in preceding periods along with the estimated promotional effects, permits the allocation to be optimized and future market share to be maximized. Then, loyalty-based consumer segment are used to explain why the budgeting exercise can achieve the maximization objective. To this end, the study uses consumer panel data concerning three categories, namely, adult milk powder, shampoo, and detergent. It extends previous research on loyalty-based segmentation by focusing on the budget allocation between the two options of loyalty enhancement and promotion programming. A Budget Allocation Grid for Loyalty-based Segmentation is proposed as an aid to understand budget allocation between loyalty and promotion programmes based on the relative sizes of exclusive-loyalty and variety-seeking segments.

Keywords: budget allocation; Markov-type market share model; loyalty programme; promotion programme; Lagrange multiplier method; loyalty-based segment (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1057/jors.2009.117 Abstract (text/html)
Access to full text is restricted to subscribers.

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:pal:jorsoc:v:61:y:2010:i:10:d:10.1057_jors.2009.117

Ordering information: This journal article can be ordered from
http://www.springer. ... search/journal/41274

DOI: 10.1057/jors.2009.117

Access Statistics for this article

Journal of the Operational Research Society is currently edited by Tom Archibald and Jonathan Crook

More articles in Journal of the Operational Research Society from Palgrave Macmillan, The OR Society
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().