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Dynamic catalog mailing policies

By Duncan I. Simester, Peng Sun and John N. Tsitsiklis

Abstract

informs ® doi 10.1287/mnsc.1050.0504 © 2006 INFORMS Deciding who should receive a mail-order catalog is among the most important decisions that mail-ordercatalog firms must address. In practice, the current approach to the problem is invariably myopic: firms send catalogs to customers who they think are most likely to order from that catalog. In doing so, the firms overlook the long-run implications of these decisions. For example, it may be profitable to mail to customers who are unlikely to order immediately if sending the current catalog increases the probability of a future order. We propose a model that allows firms to optimize mailing decisions by addressing the dynamic implications of their decisions. The model is conceptually simple and straightforward to implement. We apply the model to a large sample of historical data provided by a catalog firm and then evaluate its performance in a large-scale field test. The findings offer support for the proposed model but also identify opportunities for further improvement. Key words: dynamic optimization; catalog mailing; field test; Markov decision process History: Accepted by Jagmohan S. Raju, marketing; received April 7, 2003. This paper was with the authors months for 3 revisions

Topics: 2
Year: 2006
DOI identifier: 10.1287/mnsc.1050.0504
OAI identifier: oai:CiteSeerX.psu:10.1.1.65.1078
Provided by: CiteSeerX
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