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The 2003 ISMS Practice Prize Winner: Optimizing Rhenania's Direct Marketing Business Through Dynamic Multilevel Modeling (DMLM) in a Multicatalog-Brand Environment

Author

Listed:
  • Ralf Elsner

    (Rhenania Group, 56061 Koblenz, Germany)

  • Manfred Krafft

    (University of Muenster, Am Stadtgraben 13-15, 48143 Muenster, Germany)

  • Arnd Huchzermeier

    (WHU, Otto-Beisheim Graduate School of Management, Burgplatz 2, 56179 Vallendar, Germany)

Abstract

We introduce Dynamic Multilevel Modeling (DMLM) to a multicatalog-brand environment to determine the optimal frequency, size, and customer segmentation of direct marketing activities. This optimization method leverages multicatalog-brand effects including the utilization of prior customer ordering behavior, maximization of customer value and customer share, and economies of scale and scope in printing and mailing. This enhancement of the original DMLM-approach is called Dynamic Multidimensional Marketing (DMDM). With DMLM alone, Rhenania, a German direct mail order company, turned its catalog mailing practices around and consequently rose from the number 5 to the number 2 market position. The DMLM approach was so effective that two major competitors could be bought out. Improvements provided by DMDM were threefold: more efficient resource allocation across all catalog brands, more accurate customer microsegmentation, and more effective reactivation. Presently, the company's target is to transform single-brand customer relationships into two- or three-brand relationships with higher revenue per customer. As a consequence, the Rhenania group's performance was decoupled from the overall market trend.

Suggested Citation

  • Ralf Elsner & Manfred Krafft & Arnd Huchzermeier, 2004. "The 2003 ISMS Practice Prize Winner: Optimizing Rhenania's Direct Marketing Business Through Dynamic Multilevel Modeling (DMLM) in a Multicatalog-Brand Environment," Marketing Science, INFORMS, vol. 23(2), pages 192-206, June.
    • Handle: RePEc:inm:ormksc:v:23:y:2004:i:2:p:192-206
    DOI: 10.1287/mksc.1040.0063
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    References listed on IDEAS

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