Marketing Uplift & Predictive Modeling
Marketing Uplift(aka Marketing Lift) and Predictive Modeling are hot concepts in marketing. In this post we take a quick look at these marketing techniques.
Marketing Uplift(aka Marketing Lift) is the difference in response rate between a treated group and a randomized control group.
Marketing Uplift Modeling can be defined as improving (upping) lift through predictive modeling.
A Predictive Model predicts the incremental response to the marketing action. It is a data mining technique that can be applied to engagement and conversion rates.
Uplift Modeling uses both the treated and control customers to build a predictive model that focuses on the incremental response.
Traditional Response Modeling only uses the treated group to build a predictive modeling. Predictive Modeling separates the likely responders from the non-responders.
Traditional Response Modeling segments an audience into the following primary groups:
- The Persuadables : audience members who only respond to the marketing action because they were targeted
- The Sure Things : audience members who would have responded whether they were targeted or not
- The Lost Causes : audience members who will not respond irrespective of whether or not they are targeted
- The Do Not Disturbs or Sleeping Dogs : audience members who are less likely to respond because they were targeted
The only segment that provides true incremental responses is the Persuadables.
Because uplift modelling focuses on incremental responses only, it provides very strong return on investment cases when applied to traditional demand generation and retention activities. For example, by only targeting the persuadable customers in an outbound marketing campaign, the contact costs and hence the return per unit spend can be dramatically improved.
One of the most effective uses of uplift modelling is in the removal of negative effects from retention campaigns. Both in the telecommunications and financial services industries often retention campaigns can trigger customers to cancel a contract or policy. Uplift modelling allows these customers, the Do Not Disturbs, to be removed from the campaign.