The True Lift Model -A Novel Data Mining Approach to Response Modeling in Database Marketing

  • Lo V
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Abstract

In database marketing, data mining has been used extensively to find the optimal customer targets so as to maximize return on investment. In particular, using marketing campaign data, models are typically developed to identify characteristics of customers who are most likely to respond. While these models are helpful in identifying the likely responders, they may be targeting customers who have decided to take the desirable action or not regardless of whether they receive the campaign contact (e.g. mail, call). Based on many years of business experience, we identify the appropriate business objective and its associated mathematical objective function. We point out that the current approach is not directly designed to solve the appropriate business objective. We then propose a new methodology to identify the customers whose decisions will be positively influenced by campaigns. The proposed methodology is easy to implement and can be used in conjunction with most commonly used supervised learning algorithms. An example using simulated data is used to illustrate the proposed methodology. This paper may provide the database marketing industry with a simple but significant methodological improvement and open a new area for further research and development.

Author-supplied keywords

  • Database marketing
  • customer development
  • customer relationship management
  • data mining
  • interaction effect
  • knowledge discovery
  • predictive modeling
  • response modeling
  • treatment effect
  • true lift
  • upselling and cross-selling

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Authors

  • Victor S Y Lo

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