Segmenting and Selecting Cross-sale Prospects using Dynamic Pricing

Fredrik Thuring, Jens Perch Nielsen, Montserrat Guillén, Catalina Bolancé

Abstract

In this paper we consider segmentation of a company’s customer data base with respect to the future expected profit, emerging from not yet sold products. We consider a situation where the company is interested in contacting a subset of the customers in the data base to offer additional products. The price at which the products are offered may vary and by utilizing an estimate of the price elasticity of demand, we are able to find closed a form expression of the optimal price as well as the corresponding expected profit, for each customer prospect. We implement the methodology and test it using real data from a major Scandinavian insurance company. We underline that a closed form expression of the optimal price is seldom found in the dynamic pricing literature, suggesting that our pricing formula would be of interest to a broad audience of economists, econometricians, pricing managers and actuaries.

References

  1. Bult, J. R. and Wansbeek, T., 1995. Optimal selection for direct mail, Marketing Science, 14(4), 378-394.
  2. Bühlmann, H. and Gisler, A., 2005. A Course in Credibility Theory and its Applications (Berlin, Germany: Springer Verlag).
  3. Englund, M., Gustafsson, J., Nielsen, J. P. and Thuring, F., 2009. Multidimensional Credibility with Time Effects - An Application to Commercial Business Lines, The Journal of Risk and Insurance, 76(2), 443-453.
  4. Gönül, F. F. and Hofstede, F.T., 2006. How to compute optimal catalog mailing decisions, Marketing Science, 25(1), 65-74.
  5. Kaishev, V. K., Nielsen, J. P., Thuring, F. 2012. Optimal customer selection for cross-selling of financial services products, Expert Systems with Applications, forthcoming.
  6. Kamakura, W.A., 2007. Cross-Selling: Offering the Right Product to the Right Customer at the Right Time in Lehzan Aksoy, Timothy Keiningham and David Bejou (Eds.) Profit Maximization through Customer Relationship Marketing , Haworth Press.
  7. Kamakura, W. A., Kossar, B. and Wedel, M., 2004. ”Identifying innovators for the cross-selling of new products,” Management Science, 50, 1120-1133
  8. Kamakura, W. A., Wedel, M., de Rosa, F. and Mazzon, J. A., 2003. Cross-selling through database marketing: a mixed data factor analyzer for data augmentation and prediction, International Journal of Research in Marketing, 20(1), 45-65.
  9. Kamakura, W. A., Ramaswami, S. and Srivastava R., 1991. Applying latent trait analysis in the evaluation of prospects for cross-selling of financial services, International Journal of Research in Marketing, 8, 329- 349.
  10. Knott A., Hayes, A. and Neslin, S. A., 2002. Next-productto-buy models for cross-selling applications, Journal of Interactive Marketing, 16(3), 59-75.
  11. Li, S., Sun, B. and Montgomery, A. L. 2010. Cross-Selling the Right Product to the Right Customer at the Right Time, Journal of Marketing Research, 48(4), 683-700.
  12. Li, S., Sun, B. and Wilcox, R. T., 2005. Cross-selling sequentially ordered products: an application to consumer banking services, Journal of Marketing Research, 42, 233-239.
  13. Thuring, F., 2012. A credibility method for profitable crossselling of insurance products, Annals of Actuarial Science, 6(1).
  14. Venkatesan, R. and Kumar, V., 2004. A customer lifetime value framework for customer selection and resources allocation strategy, Journal of Marketing, 68, 106-125.
Download


Paper Citation


in Harvard Style

Thuring F., Perch Nielsen J., Guillén M. and Bolancé C. (2013). Segmenting and Selecting Cross-sale Prospects using Dynamic Pricing . In Proceedings of the 2nd International Conference on Operations Research and Enterprise Systems - Volume 1: ICORES, ISBN 978-989-8565-40-2, pages 103-108. DOI: 10.5220/0004336401030108


in Bibtex Style

@conference{icores13,
author={Fredrik Thuring and Jens Perch Nielsen and Montserrat Guillén and Catalina Bolancé},
title={Segmenting and Selecting Cross-sale Prospects using Dynamic Pricing},
booktitle={Proceedings of the 2nd International Conference on Operations Research and Enterprise Systems - Volume 1: ICORES,},
year={2013},
pages={103-108},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0004336401030108},
isbn={978-989-8565-40-2},
}


in EndNote Style

TY - CONF
JO - Proceedings of the 2nd International Conference on Operations Research and Enterprise Systems - Volume 1: ICORES,
TI - Segmenting and Selecting Cross-sale Prospects using Dynamic Pricing
SN - 978-989-8565-40-2
AU - Thuring F.
AU - Perch Nielsen J.
AU - Guillén M.
AU - Bolancé C.
PY - 2013
SP - 103
EP - 108
DO - 10.5220/0004336401030108