Dynamic and Competitive Effects of Direct Mailings

49 Pages Posted: 23 Dec 2006

See all articles by M. van Diepen

M. van Diepen

Erasmus University Rotterdam (EUR)

Bas Donkers

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management (ERIM); Tinbergen Institute

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics

Date Written: September 7, 2006

Abstract

We propose a dynamic direct mailing response model with competitive effects, where purchase and promotion history are incorporated. We then map the dynamic competitive interactions amongst the firms sending the mailings. We investigate the short- and long-run impact of a direct mailing on the revenues of the firm sending the mailing and on the revenues of its competitors. The model accounts for unobserved heterogeneity across households. We estimate the model in the charitable giving setting, as sending direct mailings represents a large part of charitable fundraising activity. Households often receive direct mailings of different charities within a short period of time and competition is highly relevant. We construct a unique database by merging the databases of three large charity organizations in the Netherlands. This results in household level data on the direct mailings received and the donations made by each household to each charity. Our results show that charitable direct mailings are short-run complements, that is, the direct mailings tend to increase the total pie that is divided among the charities. At the same time, the charitable direct mailings are long-run substitutes. In the long run they fight for a piece of the pie that households have available for charitable giving.

Keywords: Competition, Dynamics, Direct Mailings

Suggested Citation

Van Diepen, Merel and Donkers, Bas and Franses, Philip Hans, Dynamic and Competitive Effects of Direct Mailings (September 7, 2006). ERIM Report Series Reference No. ERS-2006-050-MKT, Available at SSRN: https://ssrn.com/abstract=931295

Merel Van Diepen (Contact Author)

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Bas Donkers

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
Rotterdam, NL 3000 DR
Netherlands
+31 10 408 2411 (Phone)
+31 10 408 9169 (Fax)

HOME PAGE: http://https://www.eur.nl/en/people/bas-donkers

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 2411 (Phone)
+31 10 408 9169 (Fax)

HOME PAGE: http://https://www.eur.nl/en/people/bas-donkers

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1278 (Phone)
+31 10 408 9162 (Fax)

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