Modeling Customer Opt-In and Opt-Out in a Permission-Based Marketing Context

Abstract

The rise of new media is helping marketers evolve from digital to interactive marketing, which facilitates a two-way communication between marketers and customers without intruding on their privacy. However, while research has examined the drivers of customers’ opt-in and opt-out decisions, it has investigated neither the timing of the two decisions nor the influence of transactional activity on the length of time a customer stays with an e-mail program. In this study, the authors adopt a multivariate copula model using a pair-copula construction method to jointly model opt-in time (from a customer's first purchase to the opt-in decision), opt-out time (from the opt-in decision to the opt-out decision), and average transaction amount. Through such multivariate dependences, this model significantly improves the predictive performance of the opt-out time in comparison with several benchmark models. The study offers several important findings: (1) marketing intensity affects opt-in and opt-out times, (2) customers with certain characteristics are more or less likely to opt in or opt out, and (3) firms can extend customer opt-out time and increase customer spending level by strategically allocating resources.