nep-mkt New Economics Papers
on Marketing
Issue of 2006‒04‒08
three papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. ""Counting Your Customers" One by One: An Individual Level RF Analysis Based on Consumer Behavior Theory" By Makoto Abe
  2. Prediction Markets in Theory and Practice By Wolfers, Justin; Zitzewitz, Eric
  3. El paquete turístico de todo incluido: un análisis de sus implicaciones económicas para el caso de las Islas Baleares By Joaquín Alegre; Llorenç Pou

  1. By: Makoto Abe (Faculty of Economics, University of Tokyo)
    Abstract: In customer relationship management (CRM), ad hoc rules are often employed to judge whether customers are active in a "non-contractual" setting. For example, a customer is considered to have dropped out if he or she has not made purchase for over three months. However, for customers with a long interpurchase time, this three-month time frame would not apply. Hence, when assessing customer attrition, it is important to account for customer heterogeneity. Although this issue was recognized by Schmittlein et al. (1987), who proposed the Pareto/NBD "counting your customers" framework almost 20 years ago, today's marketing demands a more individual level analysis. This research presents a proposed model that captures customer heterogeneity through estimation of individual-specific parameters, while maintaining theoretically sound assumptions of individual behavior in a Pareto/NBD model (a Poisson purchase process and a memoryless dropout process). The model not only relaxes the assumption of independence of the two behavioral processes, it also provides useful outputs for CRM, such as a customer-specific lifetime and retention rate, which could not have been obtained otherwise. Its predictive performance is compared against the benchmark Pareto/NBD model. The model extension, as applied to scanner panel data, demonstrates that recency-frequency (RF) data, in conjunction with customer behavior and demographics, can provide important insights into direct marketing issues, such as whether long-life customers spend more and are more profitable.
    Date: 2006–03
  2. By: Wolfers, Justin; Zitzewitz, Eric
    Abstract: Prediction Markets, sometimes referred to as 'information markets', 'idea futures' or 'event futures', are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes the recent literature on prediction markets, highlighting both theoretical contributions that emphasize the possibility that these markets efficiently aggregate disperse information, and the lessons from empirical applications which show that market-generated forecasts typically outperform most moderately sophisticated benchmarks. Along the way, we highlight areas ripe for future research.
    Keywords: event futures; forecasting; futures; information aggregation; information markets; prediction markets
    JEL: C53 D8 G14
    Date: 2006–03
  3. By: Joaquín Alegre; Llorenç Pou
    Abstract: The percentage of tourists visiting the Balearic Islands that choose the all inclusive package holiday has increased impressively since the turn of the century. The aim of this paper is to analyse the reasons behind this increase, as well as the economic effects that it is causing. For that purpose, several econometric models are estimated with data drawn from the Tourist Expenditure Survey and the brochures of the main tour operators in the Balearics. The main results are the following: (1) it cannot be accepted that the all inclusive product is capturing new segments of demand. (2) The increase in the percentage of tourists that choose the all inclusive product seems to be the result of a price strategy from tour operators. (3) The comparison of mean expenditure among the different types of board shows that the all inclusive option implies an expenditure per tourist per day clearly lower than that from the rest of types of board. (4) The increase of the importance of the all inclusive package is causing a dramatic change in the distribution of tourism receipts among the different economic agents. In fact, the all inclusive package shows levels of revenues paid in origin and in the Balearics highly different from those detected with the other tourist options.
    Keywords: Tourism, all inclusive package, tourist expenditure, tour operators.
    Date: 2006–03

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