Customized Targeting Strategies for Category Coupons to Maximize CLV and Minimize Cost

36 Pages Posted: 30 Jun 2019 Last revised: 18 Jan 2021

See all articles by Bernhard von Mutius

Bernhard von Mutius

WHU - Otto Beisheim School of Management

Arnd Huchzermeier

WHU - Otto Beisheim School of Management

Date Written: January 16, 2021

Abstract

It is standard procedure to use short-term measures for designing customized marketing campaigns and evaluating their success. We consider the integration of customer lifetime value (CLV) thinking into the category selection problem for targeted coupons. This problem involves two primary considerations: should the coupon be a category-specific one? – and, if so, should short-term or rather long-term objectives govern the choice of category? Our paper is the first to address these questions by analyzing the effects of different customized targeting strategies for category coupons on short-term marketing costs and long-term CLV using an analytical model. We develop these targeting strategies with the help of a data-driven customer segmentation framework based on the dimensions of churn, frequency, and loyalty. Using data from a German hypermarket chain, we identify four refined targeting strategies that enable multi-category retailers to exploit the full potential of customized marketing by optimizing the trade-off between marketing cost and CLV considerations. Our analysis reveals that the targeting strategy most likely to be employed by retail practice – as compared with the one most commonly used – can yield a substantially higher CLV even as it reduces wasteful marketing costs.

Keywords: customized coupons, targeted marketing, category selection, targeting strategies

Suggested Citation

von Mutius, Bernhard and Huchzermeier, Arnd, Customized Targeting Strategies for Category Coupons to Maximize CLV and Minimize Cost (January 16, 2021). Available at SSRN: https://ssrn.com/abstract=3411661 or http://dx.doi.org/10.2139/ssrn.3411661

Bernhard Von Mutius (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Arnd Huchzermeier

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany
+49-261-6509380 (Phone)
+49-261-6509389 (Fax)

HOME PAGE: http://www.whu.edu/prod

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
70
Abstract Views
610
rank
381,143
PlumX Metrics