Valuing customer portfolios with endogenous mass-and-direct-marketing interventions using a stochastic dynamic programming decomposition

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dc.contributor.author Esteban-Bravo, Mercedes
dc.contributor.author Vidal-Sanz, Jose M.
dc.contributor.author Yildirim, Gökhan
dc.contributor.editor Universidad Carlos III de Madrid. Departamento de Economía de la Empresa
dc.date.accessioned 2012-06-12T17:04:29Z
dc.date.available 2012-06-12T17:04:29Z
dc.date.issued 2012-06
dc.identifier.uri http://hdl.handle.net/10016/14547
dc.description.abstract Customer Relationship Management generally uses the value of customers to allocate marketing budget. But marketing interventions generally change the customer behavior, turning upside-down the customers ranking based on their initial valuations and making the budget allocation suboptimal. Rational Managers should allocate the marketing budget to maximize the expected net present value of future profits drawn from each customer, simultaneously planning mass marketing interventions and direct marketing effort on each individual. This is a large dimensional Stochastic Dynamic Program, which cannot be easily solved due to the curse of dimensionality. This paper propose a new decomposition algorithm to alleviate the curse of dimensionality in SDP problems, which allows forward-looking firms to allocate the marketing budget optimizing the CLV of their customer base, simultaneously using customized and mass marketing interventions
dc.description.sponsorship Research funded by two research projects, S-0505/TIC-0230 by the Comunidad de Madrid and ECO20011-30198 by MICINN agency of Spanish Government
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries UC3M Working papers. Business Economics
dc.relation.ispartofseries 12-04
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.other Marketing Budget allocation
dc.subject.other CRM
dc.subject.other Stochastic Dynamic Programming
dc.title Valuing customer portfolios with endogenous mass-and-direct-marketing interventions using a stochastic dynamic programming decomposition
dc.type workingPaper
dc.subject.eciencia Empresa
dc.rights.accessRights openAccess
dc.type.version submitedVersion
dc.identifier.uxxi DT/0000000928
dc.identifier.repec wb121304
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