Optimal allocation of short-term marketing resources based on customer lifetime value

Sandoghdaran, F.; Albadvi, A.; Teimourpour, B.

doi:10.22056/ijir.2020.02.08

Document Type : Original Research Paper

Authors

¹ Department of IT Engineering, Tarbiat Modares University, Tehran, Iran

² Department of Industrial Engineering, Technical and Engineering Faculty, Tarbiat Modares University, Tehran, Iran

https://doi.org/10.22056/ijir.2020.02.08

Abstract

Objective: In recent decades, considering that the costs of attracting new customers are constantly increasing, it is very important and sensitive for the profitability of organizations to pay attention to maintaining customers and increasing their loyalty. Therefore, organizations implement various programs to increase the longevity of their customers. On the other hand, not all customers have the same profitability for the organization, and the limited resources of the organization should be spent on valuable customers. The purpose of this research is to provide a mathematical model for the optimal selection of target customers for retention programs and also to select the cost for each customer.
Methodology: The present research was carried out in 3 main steps. In the first step, using data mining, the probability of customers turning away is obtained. In the second step, the customer's lifetime value is calculated, and in the last step, the proposed optimization model is solved. LP-Metric was used to solve the model, and it was solved in GAMS software. Real data from one of the country's insurance organizations was used to solve the proposed model.
Findings: A two-objective optimization model based on customer lifetime value has been presented. One of the objective functions is related to maximizing the customer lifetime value by implementing the retention program and the other objective is related to minimizing the costs of the program.
Conclusion: By solving the proposed optimization model, a Pareto chart has been obtained that, considering the opinion of experts, every point on this chart can be an optimal answer for choosing the target customers of sustainability programs and the way of spending for them.

Keywords

References

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Iranian Journal of Insurance Research

Optimal allocation of short-term marketing resources based on customer lifetime value

References

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Letters to Editor

Send comment about this article

Volume 9, Issue 2 - Serial Number 32
April 2020
Pages 231-245

Optimal allocation of short-term marketing resources based on customer lifetime value

References

References

Letters to Editor

Send comment about this article

Volume 9, Issue 2 - Serial Number 32April 2020Pages 231-245

Volume 9, Issue 2 - Serial Number 32
April 2020
Pages 231-245