Customer-Centric Category Selection for Mobile and Print Promotions in Loyalty Reward Programs

Bernhard Von Mutius,Arnd Huchzermeier

doi:10.2139/ssrn.3592311

Abstract

Customer-Centric Category Selection for Mobile and Print Promotions in Loyalty Reward Programs

Highlights

Targeted promotions are based on customer information and so enable retailers to maximize the impact of their marketing efforts (Rossi, McCulloch, & Allenby, 1996; Zhang & Krishnamurthi, 2004)
We address this research gap by developing a predictive customer-centric category selection approach based on the proven measure of return on marketing investment, or ROMI (Rust, Lemon, & Zeithaml, 2004)
This study details a new approach to the category selection problem and the first that targets promotions based on the metric of return on marketing investment

Summary

Introduction

Targeted promotions are based on customer information and so enable retailers to maximize the impact of their marketing efforts (Rossi, McCulloch, & Allenby, 1996; Zhang & Krishnamurthi, 2004). Category-specific promotions, or promotions that limit the customer benefit to just one product category, are widespread in retailers’ loyalty reward programs (LRPs). This paper studies the category selection problem for these promotions from a multi-category retailer’s perspective by addressing this practice-relevant question: which categories (eg, wine, cheese) should be emphasized in targeted promotions if the goal is to maximize the marketing campaign’s profitability?. While the motivation for this research question originates in the context of grocery retailing, it is relevant for any online or offline multi-category retailer Traditional offline retailers must manage with tools such as a loyalty reward program to gather this “big data”

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Conclusion