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Dynamic Catalog Mailing Policies

Author

Listed:
  • Duncan I. Simester

    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

  • Peng Sun

    (Fuqua School of Business, Duke University, Durham, North Carolina 27708)

  • John N. Tsitsiklis

    (Laboratory for Information and Decision Systems and Operations Research Center, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

Abstract
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.

Suggested Citation

  • Duncan I. Simester & Peng Sun & John N. Tsitsiklis, 2006. "Dynamic Catalog Mailing Policies," Management Science, INFORMS, vol. 52(5), pages 683-696, May.
    • Handle: RePEc:inm:ormnsc:v:52:y:2006:i:5:p:683-696
    DOI: 10.1287/mnsc.1050.0504
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    References listed on IDEAS

    as
    1. Richard Bellman, 1957. "On a Dynamic Programming Approach to the Caterer Problem--I," Management Science, INFORMS, vol. 3(3), pages 270-278, April.
    2. Gabriel R. Bitran & Susana V. Mondschein, 1996. "Mailing Decisions in the Catalog Sales Industry," Management Science, INFORMS, vol. 42(9), pages 1364-1381, September.
    3. Füsun Gönül & Meng Ze Shi, 1998. "Optimal Mailing of Catalogs: A New Methodology Using Estimable Structural Dynamic Programming Models," Management Science, INFORMS, vol. 44(9), pages 1249-1262, September.
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    5. Ralf Elsner & Manfred Krafft & Arnd Huchzermeier, 2003. "Optimizing Rhenania's Mail-Order Business Through Dynamic Multilevel Modeling (DMLM)," Interfaces, INFORMS, vol. 33(1), pages 50-66, February.
    6. Ronald A. Howard, 2002. "Comments on the Origin and Application of Markov Decision Processes," Operations Research, INFORMS, vol. 50(1), pages 100-102, February.
    Full references (including those not matched with items on IDEAS)

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