Mathematical programming based heuristic model for the product targeting problem

Abstract

Marketing community has been changing dramatically with the new addiction and lifestyle by using technological improvements in our daily life. Customers can easily choose another product or shift the service if the attractive activity is not provided by the company. Besides meeting of customer requirements, keeping of customer lifetime as long as possible is crucial to pace with today's competitive markets. To do this, marketing managers have been focusing on retention of customers by offering different promotion campaigns. Planning these campaigns brings a problem: "which product should be targeted to which customer to maximize profits". This problem became vitally important in the environment of limited budget and minimum sales target. The main focus of the product targeting problem is to maximize total profit by means of offering different products to clients while satisfying various business constraints. From the operational research perspective, this problem is an NP-hard problem. In this study, a mathematical programming based heuristic approach is suggested to the product targeting problem. The proposed approach is tested on a suit set of test problems from the literature and it's observed that this mathematical programming based heuristic is capable to find optimal or near optimal solutions. Effectiveness and efficiency of the approach are also showed on very-large sized test problems generated after confirming its performance on the test problems with small and moderate sizes.