Monday, June 18, 2007

Using Profitability Models with Data Mining For Direct Marketing Success

As direct marketers, we are constantly searching for better ways to reach our customers and cause a positive reaction (i.e., get them to buy some of our products or services). Recently, CIO Insight published an article that talks about utilizing profitability models in conjunction with data mining to create more profitable customer relationships (our mantra).

The authors state, "We can use these models to come up with very accurate forecasts about how long this customer will stay with us or how many purchases they'll make over the next year. So, use the basic probability model to capture the basic behavior and then bring in data mining to understand why groups of customers with different behavioral tendencies are different from each other." It's a perfect marriage of two scientific marketing tools that when joined together can really boost the success of our direct marketing efforts. It makes our hearts sing to be able to more effectively dig out those profitable customers! More importantly, this gives us the ability to enhance the customer experience by knowing how to treat our valuable customers.

In addition, using profitability modeling with data mining helps us to profile new customers and understand the likely actions of current ones. It simply makes sense to utilize these techniques together. If you're interested in this topic, make sure you read this article -- it's excellent! Also, we have written a Customer Profitability Case Study that you may enjoy.

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