MAILING DECISIONS IN THE CATALOG SALES INDUSTRY

Catalog sales are among the fastest growing businesses in the U.S. The most important asset a company in this industry has is its list of cu stomers, called the house list. Building a house List is expensive, si nce the response rate of names from rental lists is low. Cash manageme nt therefore plays a central role in this capital intensive business, This paper studies optimal mailing policies in the catalog sales indus try when there is limited access to capital, We consider a stochastic environment given by the random responses of customers and a dynamic e volution of the house list. Given the size of real problems, it is imp ossible to compute the optimal solutions. We therefore develop a heuri stic based on the optimal solutions of simplified versions of the prob lem. The performance of this heuristic is evaluated by comparing its o utcome with an upper bound derived for the original problem. Computati onal experiments show that it bt haves satisfactorily. The methodology presented permits the evaluation of potential catalog Ventures thus p roving useful to entrepreneurs in this industry.