Direct marketing (mail) is a growing area of marketing practice, yet the academic journals contain very little research on this topic. The most important issue for direct marketers is how to sample targets from a population for a direct mail campaign. Although some selection methods are described in the literature, there seems to be not a single paper discussing the analytical and statistical aspects involved. The objective of this paper is to introduce a comprehensive methodology for the selection of targets from a mailing list for direct mail. At least theoretically, this methodology leads to more efficient selection procedures than the existing ones. The latter are not based on an optimal selection strategy, whereas we explicitly take the profit function into account. By equating marginal costs and marginal returns we determine which households should receive a mailing in order to maximize expected profit. In the empirical part we show that our methodology has great predictive accuracy and generates higher net returns than traditional approaches.econometric models, estimation and other statistical techniques, direct marketing

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The crror-components model (ECM) is probably the most frcquently used approach to analyze panel data in econometrics. When the panel is incomplete, which is the rule rather than the exception when the data come [rom large-scale surveys, standard estimation methods cannot be applied. We first discuss estimation in the fixed-efTects analogue of the ECM, and then present two estimators (quadratic unbiased and maximum likelihood) for the ECM. Some simulation results are given to assess finite-sample properties and computational burden of the various methods.