Valuing customer portfolios with endogenous mass-and-direct-marketing interventions using a Stochastic Dynamic Programming Decomposition

The CRM allocation of marketing budget is potentially misleading when it uses individual CLV estimations from historical data. Planned marketing interventions would change the purchasing behavior of different customers and history- based decisions would thus be sub-optimal. To cope with this inherent endogeneity, we model the optimal allocation of the marketing mix by accounting simultaneously for mass interventions and direct marketing interventions on each customer. This is a large stochastic dynamic problem that, in general, is computationally rather intractable due to the “curse of dimensionality”. We present an algorithm to derive the optimal marketing policies (how the firm should allocate its marketing resources), and the expected present value of those decisions which maximize the long-term profitability of firms. This allows the firm to value customers/segments and helps the firm to target the customers/segments that maximize long-term profitability given the optimal marketing resources allocation. We apply the proposed approach in the context of a manufacturer of kitchen appliances. The results identify the most effective marketing policies and the endogenous customer values. It is in this context that we also dynamically identify the most-profitable customer and the short- and long-term effects of marketing activities on each customer

Long-term stasis in ecological assemblages: Evidence from the fossil record

Studies of plant and animal assemblages from both the terrestrial and the marine fossil records reveal persistence for extensive periods of geological time, sometimes millions of years. Persistence does not require lack of change or the absence of variation from one occurrence of the assemblage to the next in geological time. It does, however, imply that assemblage composition is bounded and that variation occurs within those bounds. The principal cause for these patterns appears to be species-, and perhaps clade-level, environmental fidelity that results in long-term tracking of physical conditions. Other factors that influence persistent recurrence of assemblages are historical, biogeographic effects, the law of large numbers, niche differentiation, and biotic interactions. Much research needs to be done in this area, and greater uniformity is needed in the approaches to studying the problem. However, great potential also exists for enhanced interaction between paleoecology and neoecology in understanding spatiotemporal complexity of ecological dynamics