Hitting the Bull's-Eye: Using Uplift Modeling to Improve Marketing Campaigns
In the game of marketing, relevancy is king. Ensuring your message is targeted to your customers' needs should always be a top priority, and how well you achieve this relevancy will have an immense impact on the success of your campaigns. Equally as important, however, is ensuring your audience is correctly targeted.
Even if the message is on target, your campaign will be wasteful and less successful if you're reaching out to the wrong people. Blanket, untargeted marketing campaigns are costly, ineffective and can even be detrimental to sales. Conversely, more targeted campaigns, fueled by intelligent analytics, can help companies reduce marketing costs while also increasing results.
Today's marketers must equate marketing dollars spent to revenue gained through targeting customers. This is sometimes a struggle because traditional modeling does not account well for the customers that may respond negatively to marketing campaigns.
Understanding how customers truly respond to a campaign is the key to success. This insight will ensure that marketers only target customers who are most likely to react positively to the marketing message, avoiding all others.
Traditional response models effectively assume that all purchases during, or slightly after, a campaign are incremental, i.e., would not have happened if the campaign had not been carried out. They also implicitly assume that no purchases are lost as a result of the campaign. History has taught us that this is simply not true - conventional response models can be misleading and new; more sophisticated uplift models (incremental models) are shown to perform much better.
Uplift modeling is an analytic-based approach to marketing that predicts the difference a marketer's actions will make on the behavior of his or her customers. This approach divides your audience into segments based on the predicted difference in response to a marketing campaign when compared to a control group. This allows marketers to focus efforts only on "the persuadables," those who are likely to respond to marketing by buying (or renewing), but wouldn't have if you hadn't contacted them.