Proceedings of 29th International Business Research Conference
24 - 25 November 2014, Novotel Hotel Sydney Central, Sydney, Australia , ISBN: 978-1-922069-64-1
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The current intense competition of mobile operators in Indonesia has resulted in price wars among them to win subscribers. This situation makes some companies increase their efforts and resources to retain and to increase revenue from existing customers. Big operators have different services for different segments; the question is how to allocate the total marketing budget into each segment in order to obtain the highest return with minimum risk. This research aims at developing a framework and model for such operators to optimally allocate their marketing budget.
The developed framework consists of two stages. The first stage includes revenue forecasting, customer economic value projection, and customer risk assessment for each customer segment using statistical tools. The second stage includes the budget optimisation by employing an MV
(minimum-variance) portfolio model which parameters come from the first stage. This paper illustrates also the implementation of the developed framework using actual three-year past data provided by an Indonesian mobile operator company. Using the data provided by the company, a non-linear optimization model which parameters are empirically estimated from the data is successfully built and run. The output of the model is an optimal marketing budget portfolio for each segment within a given profit target. Furthermore, by running different revenue and risk target scenarios, the model can generate also an efficient frontier curve which further can be used by the company in its marketing budget allocation decision making process.
Keywords : Marketing Budget Optimization, Customer Economic Value, Customer
Relationship Management, Mobile Operator
Track : Marketing
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Mr. Titah Yudhistira, corresponding author, Industrial Engineering & Engineering Management Department,
Institut Teknologi Bandung, Indonesia, Jalan Ganesha 10, Bandung 40132, Indonesia, Phone/fax: +62 22
2510680. Email: titah@mail.ti.itb.ac.id
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Mr. Tinton Ardian, Industrial Engineering Department, Institut Teknologi Bandung, Indonesia
Dr. Yosi Agustina Hidayat, Industrial Engineering & Engineering Management Department, Institut Teknologi
Bandung, Indonesia
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Ms. Ariska Djajantie, Engineering Management Department, Institut Teknologi Bandung, Indonesia