The purpose of this paper is to study the optimal contact policies for customers that belong to the mass affluent market.
The authors formulate a stochastic dynamic programming model to determine the optimal frequency of contacts in order to maximize the expected return of the company.
The authors show that personalized marketing strategies provide a competitive advantage to companies that contact their customers directly through, for example, phone calls or meetings. The authors show that a threshold policy is only optimal for customers with increasing sensitivity to contact. In all other cases, optimal policies might have a less intuitive structure. The authors also study the importance of the size of the customer database and determine the optimal maximum recency when maintenance costs are present.
Contact policies should be tailored for each company/industry individually, due to their sensitivity to customers’ purchasing behavior.
