Calling Customers to Take Action: The Impact of Incentive and Customer Characteristics on Direct Mailing Effectiveness

Abstract

This study investigates the effect of call-to-action (CTA) direct mailings (DMs) on customers' purchase behavior and how this effect is moderated by incentive type as well as customer characteristics. The authors analyze individual purchase behavior of a panel of 179,525 customers across 40 Dutch optical retailers over 9 years. The empirical results show that CTA DMs that include an incentive have a higher positive impact on customer's purchase probability compared with those without an incentive. Furthermore, non-monetary incentives, especially utilitarian ones, have a higher positive impact than monetary incentives. Our results also show that customer heterogeneity plays an important role in the influence of CTA DMs on purchase incidence. More specifically, CTA DMs have a higher impact on purchase incidence for customers with higher past purchase frequency, lower purchase recency, longer relationship duration and for customers who received DM more recently and frequently. The results of the study provide valuable insights for managers allocating their direct marketing budget: it is better to use non-monetary (preferably utilitarian) incentives and to target customers based on relationship history as well as DM history.