Analytical challenges in customer acquisition

Behram J. Hansotia*, Paul Wang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

45 Scopus citations

Abstract

Three customer acquisition scenarios are discussed: first, where prospects' response behavior varies over their profiles but the offer/creative and customers' lifetime values (LTV) are assumed fixed and known; second, where the response behavior depends on both profile and creative/offer characteristics with the customers' LTV still assumed to be fixed; and third, where both response and customer LTV are allowed to vary. Using well-known breakeven analysis principles, the paper presents a simple relationship to determine which prospects should be contacted and then presents statistical models to estimate response and customer value at the individual level. This allows the practical application of the breakeven analysis to each individual prospect. It helps answer the question: should this prospect be invited to become a customer?.

Original languageEnglish (US)
Pages (from-to)7-19
Number of pages13
JournalJournal of Interactive Marketing
Volume11
Issue number2
DOIs
StatePublished - 1997

Funding

BEHRAM HANSOTIA is Senior Vice President, Strategic Services at InfoWorks, a division of Rapp Collins Worldwide and the Omnicom Group. His postdoctoral experience spans academia, industry, and management consulting, with the last 12 years devoted exclusively to the strategic application of database marketing, to enhance firm value. Over the years his clients have included many leading Fortune 500 companies. Dr. Hansotia has a PhD in Management Science from the University of Illinois at Champaign-Urbana and teaches regularly in the Integrated Marketing Communications program at Northwestern University. A much sought-after speaker at professional conferences, he serves on the editorial boards of the Journal of Direct Marketing and the Journal of Database Marketing. He also serves on the Operating Committee of the Direct Marketing Association’s Research Council. He has published over 25 articles in marketing, direct marketing, and management science journals and is a member of INFORMS, the Institute for Operations Research and Management Science. PAUL WANG, PhD is an Associate Professor in the Integrated Marketing Communications program at Northwestern University. He specializes in database, direct, and interactive marketing issues, and also serves as a faculty member for the Northwestern Media Center. Dr. Wang conducts executive training seminars at Northwestern and in the private sector. He teaches professionals how to take advantage of information technology so they can add value to their products and services. Dr. Wang has served as a consultant to a variety of companies interested in strategic database marketing, including the Lexus division of Toyota Motor Corporation, Hewlett-Packard, UPS, IBM, The Limited, Pioneer Hi-Bred International, Texas Instruments, Hyatt International, and Ogilvy and Mather. He also speaks frequently at both international and domestic conferences. He recently co-authored the book Strategic Database Marketing, published by NTC Publishing. He also serves as the technical editor for the Journal of Direct Marketing and is a member of the review board of the Journal of Database Marketing. In 1995, he was the recipient of the Robert B. Clarke Outstanding Direct Marketing Educator Award, presented by the Direct Marketing Educational Foundation of the Direct Marketing Association. He obtained his PhD in communications studies and an MS in advertising from Northwestern University.

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

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