The Journal of Retailing (ERIM P: Impact Factor: 5.873) accepted article by Dr. Bernhard von Mutius and Prof. Dr. Arnd Huchzermeier on Customized Targeting Strategies for Category Coupons to Maximize CLV and Minimize Cost. The article will appear in the special issue on Metrics and Analytics in Retailing. The authors acknowledge the discussion rounds and the data provided by Mr. Marcel Uphues, former Finance Director, and Mr. Stefan Länge, Department Head of Customer Information Management, from the Retailer Real.
Title: Customized Targeting Strategies for Category Coupons to Maximize CLV and Minimize Cost
Abstract: It is standard procedure to use short-term measures for designing customized marketing campaigns and evaluating their success. We consider the integration of customer lifetime value (CLV) thinking into the category selection problem for targeted coupons. This problem involves two primary considerations: should the coupon be a category-speciﬁc one? – and, if so, should short-term or rather long-term objectives govern the choice of category? Our paper is the ﬁrst to address these questions by analyzing the eﬀects of diﬀerent customized targeting strategies for category coupons on short-term marketing costs and long-term CLV using an analytical model. We develop these targeting strategies with the help of a data-driven customer segmentation framework based on the dimensions of churn, frequency, and loyalty. Using data from a German hypermarket chain, we identify four reﬁned targeting strategies that enable multi-category retailers to exploit the full potential of customized marketing by optimizing the trade-oﬀ between marketing cost and CLV considerations. Our analysis reveals that the targeting strategy most likely to be employed by retail practice –as compared with the one most commonly used – can yield a substantially higher CLV even as it reduces wasteful marketing costs.
Key words: customized coupons, targeted marketing, category selection, targeting strategies