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http://dx.doi.org/10.7469/JKSQM.2018.46.4.797

A Study on Cost Rate Analysis Methodology of Credit Card Value Proposition  

Lee, Chan-Kyung (School of Management, Hongik University)
Roh, Hyung-Bong (Department of Management, Hongik University)
Publication Information
Journal of Korean Society for Quality Management / v.46, no.4, 2018 , pp. 797-820 More about this Journal
Abstract
Purpose: It is to seek for an appropriate cost rate analysis methodology of credit card value propositions in Korea. For this issue, it is claimed that methodologies based on probability distribution is more suitable than methodologies based on data-mining. The analysis model constructed for the cost rate estimation is called VCPM model. Methods: The model includes two major variables denoted as S and P. S is monthly credit card usage amount. P stands for the proportion of usage amount at special merchants over the whole monthly usage amount. The distributions assumed for P are positively skewed distributions such as exponential, gamma and lognormal. The major inputs to the model are also derived from S and P, which are E(S) and the aggregate proportion of usage amount at special merchants over the total monthly usage amount. Results: When the credit card's value proposition is general discount, the VCPM model fits well and generates reasonable cost rate(denoted as R). However, it seems that the model does not work well for other types of credit cards. Conclusion: The VCPM model is reliable for calculating cost rate for credit cards with positively skewed distribution of P, which are general discount card. However, another model should be built for cards with other types of distributions of P.
Keywords
Credit Card Usage; Probability Distribution; Simulation;
Citations & Related Records
Times Cited By KSCI : 1  (Citation Analysis)
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