Dynamic Catalog Mailing Policies
Deciding who should receive a mail-order catalog is among the most important decisions that mail-order-catalog 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.
Volume (Year): 52 (2006)
Issue (Month): 5 (May)
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- Gabriel R. Bitran & Susana V. Mondschein, 1996. "Mailing Decisions in the Catalog Sales Industry," Management Science, INFORMS, vol. 42(9), pages 1364-1381, September.
- Ronald A. Howard, 2002. "Comments on the Origin and Application of Markov Decision Processes," Operations Research, INFORMS, vol. 50(1), pages 100-102, February.
- Richard Bellman, 1957. "On a Dynamic Programming Approach to the Caterer Problem--I," Management Science, INFORMS, vol. 3(3), pages 270-278, April.