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Direct Marketing (DM) - sending promotional messages to individual customers - is increasingly used by marketers as a result of the explosive growth of customer databases. Most current methods to calculate optimal budgets for such DM campaigns consider customers in isolation and ignore word-of-mouth communication (WOM). When the customer base forms a network (as is the case in telecom or social network databases) ignoring WOM clearly leads to suboptimal DM budgets. This paper develops a model to help address this challenge. The authors assume that firms know the network structure formed by customers but do not know (or are not allowed to use) data on individuals' connections.
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