Assessing return on marketing contacts in B2B market

Date of Completion

January 2009


Business Administration, Marketing|Business Administration, Management




For two reasons, Business-to-Business (B2B) marketers face greater challenges in measuring return on marketing investment than Business-to-Consumer (B2C) marketers. First, business buyers have an irregular purchase pattern. Second, marketing efforts take a longer time to build a business relationship. A significant challenge for managers in business-to-business markets is deciding how to allocate limited marketing resources across various customers and accounts. Typically, these decisions pertain to which account to contact and when. The goal of this research is to create tools for optimizing the allocation of resources and maximizing profits.^ The objectives of the first essay are twofold. First, we seek to understand the different ways in which contacts made by the supplier firm can affect an account's buying behavior over time. We use a Hidden Markov Model (HMM) to capture the changes in the unobserved strength of the buyer-seller relationship based on the observed frequency and quantity of purchases made by the buyer. Our second objective is to understand how the various modes of contacting customers differ in terms of their effectiveness in altering the different aspects of buyer behavior such as frequency and quantity of purchases. Our research is likely to make significant contributions to the academic literature as well as the practice of B2B marketing.^ The purpose of the second essay is to capture the effect of marketing contacts such as direct mailings and telephone calls on buyer-seller relationships with heterogeneous buyer responses. We propose using a stochastic computing method, FB Method (Chib, 1996) to estimate the Bayesian Hidden Markov model. This method uses the forward – backward algorithm to retrieve the right relationship state, a key focus in our research. This essay will not only provide practical value to practitioners but will also introduce a new method to the marketing literature.^