RESPONSE MODELING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NG The United States is unusual in both the extent of commercially available household data and the relatively few restrictions on its use. Although household data is available in many countries, the rules governing its use differ. There are especially strict rules governing transborder transfers of personal data. Before planning to use houshold data for marketing, look into its availability in your market and the legal restrictions on making use of it. Household-level data can be used directly for a first rough cut at segmenta­ tion based on such things as income, car ownership, or presence of children. The problem is that even after the obvious filters have been applied, the remain­ ing pool can be very large relative to the number of prospects likely to respond. Thus, a principal application of data mining to prospects is targeting—finding the prospects most likely to actually respond to an offer.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Response Modeling Direct marketing campaigns typically have response rates measured in the single digits. Response models are used to improve response rates by identify­ ing prospects who are more likely to respond to a direct solicitation. The most useful response models provide an actual estimate of the likelihood of response, but this is not a strict requirement. Any model that allows prospects to be ranked by likelihood of response is sufficient. Given a ranked list, direct marketers can increase the percentage of responders reached by campaigns by mailing or calling people near the top of the list. The following sections describe several ways that model scores can be used to improve direct marketing. This discussion is independent of the data Data Mining Applications mining techniques used to generate the scores. It is worth noting, however, that many of the data mining techniques in this book can and have been applied to response modeling. According to the Direct Marketing Association, an industry group, a typical mailing of 100,000 pieces costs about $100,000 dollars, although the price can vary considerably depending on the complexity of the mailing. Of that, some of the costs, such as developing the creative content, preparing the artwork, and initial setup for printing, are independent of the size of the mailing. The rest of the cost varies directly with the number of pieces mailed. Mailing lists of known mail order responders or active magazine subscribers can be pur­ chased on a price per thousand names basis.