This article examines the impact of using incremental amounts of purchasing data on the ability to classify consumers in consumer packaged goods categories for direct marketing purposes. Building on the work of Rossi, McCulloch, and Allenby (1996), who focused on the impact of three information sets—(a) demographics only, (b) demographics and one purchase made by a consumer, and (c) demographics plus an entire purchasing history of a consumer—we examine the impact of each additional purchase, starting with no purchasing information (i.e., demographics only) through 20 purchases. Using two different classification models, a Multinomial Logit model and an Artificial Neural Network model, we examine the sensitivity of classification accuracy to each additional purchase. We use these results in a profitability analysis of a hypothetical direct marketing campaign to determine the optimal number of purchases to use for classification in the category studied. The findings suggest an optimal number of purchasing observations exists for classification and targeting purposes and this optimal number falls between one purchase and a “history” of purchases as studied by Rossi et al. Our findings illustrate the importance of conducting a sensitivity analysis to identify the optimal amount of purchasing data to use when classifying consumers for the purpose of a direct marketing campaign.
Abstract:One key consequence of the dynamic capabilities approach is that the competitive advantage of a firm lies in its organisational and managerial processes. The research question examined in this paper is how organisational processes such as knowledge management and managerial processes such as the coordination between top managers specifically create dynamic capabilities. After reviewing the literature, several case studies are presented and the impact of these particular organisational and managerial processes on dynamic capabilities is examined in detail. The first case is a healthcare firm that used a managerial process; however, this firm did not achieve a dynamic capability. The other two cases specifically illustrate how a financial services firm used an organisational process and how a manufacturing firm used a managerial process to develop dynamic capabilities. In comparing these three cases, the three sets of activities that are necessary to develop a dynamic capability are demonstrated.
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