In order to optimize the promotional mix, direct marketing managers must cluster their customers and decide how much to invest on each class of customers. The well known Recency-Frequency-Monetary rule links promotional spending to potential profits and is estimated through a past behavior based model. This paper presents an application of this model for setting the promotional policy of a fund raising firm. Groups of donors' size and behaviors (donor versus non donor) are studied over time, and are modeled as Markov Processes. Normative implications for promotional policy determination are discussed.
DESMET, P. (1992). Normative Segmentation and Customer Classes in Fund Raising. ESSEC Business School.