What is Predictive Modeling?

Predictive Modeling encompasses a variety of techniques to analyze current and historical facts to make predictions about future events. Predictive models exploit patterns found in historical and transactional data to identify risks and opportunities. Models capture relationships among many factors to allow assessment of risk or potential associated with a particular set of conditions, guiding decision making for candidate transactions. 2August 2011 by S. Balkan

How Harrah’s used Predictive Models As we have seen in the Harrah’s case, Harrah's began segmenting its customers to better target customers based on a variety of behaviors. Harrah's uses predictive analytics technologies with its rewards program data to build customer loyalty. SAS spotlights factors currently affecting customer behavior so Harrah's can deliver the most meaningful offers possible to its valued customers through automated campaigns. 3August 2011 by S. Balkan

How Predictive Models are used? Predictive models estimate customers’ probability to respond to an offer. Then customers in the data base are sorted in descending order by their probability. 4August 2011 by S. Balkan

What is a Decile? A decile is a division of the population by their scores such that there are an equal number (one-tenth) of the subjects in each. The Top Decile refers to the top 10% of subjects who received the highest scores by the model A person on the 1 st Model decile is more likely to respond to an offer compared to a person in the subsequent deciles Most likelyLeast likely More profitableLess profitable 5August 2011 by S. Balkan

What is a Marketing Campaign? Definition: A specific, defined series of activities used in marketing a new or changed product or service, or in using new marketing channels and methods When Predictive Models are used in selection it is called a Targeted Campaign 6August 2011 by S. Balkan

Campaign Results/New Campaign Cycle/New Models Once the campaign results are gathered, these results are used in understanding how the models have performed and fed into the selection of the next customers in the following campaign cycle and/or used for building more predictive models 7August 2011 by S. Balkan

What is a dashboard? Dashboard reports allow managers to step back from the details and see the key trends and relationships that drive their companies 8August 2011 by S. Balkan

What happens when managers have multiple predictive models? Managers try to find ways to identify predictive power of multiple models to select the best model(s) 9August 2011 by S. Balkan