Source: Dissertation Abstracts International, Volume: 58-05, Section: A, page: 1816.

Director: Subrata K. Sen.

Essay 1: Direct marketer vs. retailer: A strategic analysis of competition and market structure. This essay is a first effort towards understanding the strategic interaction between direct and traditional retail channels, within a formal game theoretic framework. First, we describe two equilibria which relate existing retail structure to the nature of competition between sellers. Market entry is then considered. The analysis indicates that markets which are closed to retail entry may yet be accessible to direct channels, suggesting that the growth of direct marketing may be interpreted as a reaction to saturated retail markets. However, the retail sector can use structural adjustments to deter or soften the impact of entry. The joint ownership of physically different channels is then modeled.

The competition between sellers in a catalog marketing scenario is studied in an imperfect information setting. The market coverage decision of the catalog marketer is shown to have strategic implications. An aggressive expansion of the mailing list may sometimes hurt the catalog marketer.

Empirical work analyzes the strength of retail and direct channel presence across product categories. The variation in this strength is explained using consumer level measures of shopping attitudes, providing an understanding of the forces which influence channel choice by sellers.

Finally, competition between multiple direct marketers and retailers is modeled in an electronic marketing scenario. The analysis indicates that electronic markets can be extremely competitive, but a combination of product differentiation and market coverage decisions can help maintain profitability.

Essay 2: Customer equity and relationship management for a catalog marketing firm. Reductions in catalog production and mailing costs have a significant positive impact on the profits of catalog marketers. Towards this end, the customer is evaluated as an investment opportunity in this essay. A probabilistic model of customer purchase behavior is presented. Using a state space representation of purchase histories, this model is then integrated with a dynamic programming framework and applied to model customer equity. Customers to be deactivated from the mailing list are demarcated, and optimal customer base management policies are detailed. Empirical work calibrates the model using data from a direct marketing firm.