An empirical study of dynamic customer relationship management |
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| Authors: | Chunqing Li Yinfeng Xu Hongyi Li |
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| Affiliation: | aSchool of Economics and Management, Tsinghua University, Beijing 100084, China;bSchool of Economics and Management, Xi’an Institute of Technology, Xi’an, Shaanxi 710032, China;cManagement School, Xi’an Jiaotong University, Xi’an, Shaanxi 710049, China;dDepartment of Decision Sciences and Managerial Economics, Chinese University of Hong Kong, Shatin, NT, Hong Kong |
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| Abstract: | We apply the Gönül and Shi (1998) approach to the analysis of the optimal messaging and pricing policy mix by studying the past transaction patterns between a local supermarket and its consumers. We develop a dynamic customer relationship management model and investigate the relationship between customer utility and purchasing frequency by modifying the return function of the model discussed in Gönül and Shi (1998). In particular, we extend the analysis to consider a messaging and pricing policy mix, and we use a genetic algorithm in our empirical estimation. When applied to some non-seasonal products in a local supermarket, we find that our model is suitable and far superior to the one-stage model commonly used. Our dynamic model gives the optimal marketing mix strategies in different customer states and the results show that the firm could enjoy a 22% increase in profit. |
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| Keywords: | Dynamic customer relationship management Customer utility Customer lifetime value Markov-perfect equilibrium |
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