Rhenania was chosen to receive the first INFORMS Society for Marketing Science Practice Prize from a field that included 31 competitors and 3 finalists, from Europe, North America, and Australia.
The winning paper's lead author, Ralf Elsner, used the work as a foundation for his PhD dissertation and showed how the company could improve the way it determines when and how often to mail its direct mail pieces - and who should receive them.
The company's CEO, Frederick Palm, took a chance on his scholarly Vice President of Marketing. His chance paid off. Within a year, Rhenania turned its catalog mailing practices around and rose from fifth to second in market position. Mr. Palm flew from Germany to Maryland to participate in the competition and receive the award alongside the winning team.
"This is a perfect example of how marketing science and operations research techniques, when chosen by executives who recognize their tremendous potential, provide enormous benefit to a company," said Gary L. Lilien, chairman of the INFORMS Prize Committee and a Past President of the professional association.
The winning paper is entitled "Optimizing Rhenania's Direct Marketing Business Through Dynamic Multi-Level Modeling (DMLM) in a Multi-Catalog-Brand Environment." The co-authors are Manfred Krafft of the University of Muenster and Arnd Huchzermeier of the WHU Otto-Beisheim Graduate School of Management.
Rhenania, a German direct mail order company, used the model to answer the most important direct marketing questions: when, how often, and to which people in the customer base the company should mail its catalogs. The uniqueness of their approach, write the authors, is first, that it dynamically evaluates customers based on their past purchase history; and second, that it derives a threshold level of sales per customer needed to maximize profits in mailing campaigns over time and across multiple customer segments.
The approach was so effective that in a relatively short period of time after introducing the model, Rhenania acquired two of its major competitors, including a subdivision of the Springer Publishing Company that dwarfed it in size.
An earlier version of the paper was named a finalist in the 2002 INFORMS Franz Edelman Award for Achievement in Operations Research and the Management Sciences.
The new INFORMS Society for Marketing Science Practice Prize is awarded for outstanding implementation of marketing science concepts and methods. The methodology must be sound and appropriate to the problem and organization. The work should have a significant, verifiable, and quantitative impact on the performance of the client organization.
The announcement was made earlier this month at the 25th annual INFORMS Marketing Science Conference, which took place at the University of Maryland Robert H. Smith School of Business in College Park, Maryland.
The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, the stock market, and telecommunications. The INFORMS website is at http://www.informs.org.