Optimizing Rhenania's mail-order business through dynamic multilevel modeling

Rhenania, a German direct mail-order company, turned its catalog mailing practices around within one year and consequently moved up in market position from number 5 to number 2. A dynamic multilevel modeling (DMLM) approach uses elasticities to determine the optimal frequency of catalog mailings, a customer-segmentation approach allows for optimization of mailings, and a recency, frequency, monetary-value segmentation in combination with a chi-square automatic interaction detection algorithm determines when customers should receive a reactivation package – as opposed to a catalog – to optimize mailing efficiency further. The DMLM approach was so effective that Rhenania acquired two competitors (one a subdivision of Springer Verlag).