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.
August 2011 by S. Balkan
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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.
August 2011 by S. Balkan
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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.
August 2011 by S. Balkan
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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 1st Model decile is more likely to respond to an
offer compared to a person in the subsequent deciles
Decile1
1
Decile2
1
Decile3
1
Decile4
Decile5
Decile6
Decile7
Decile8
Decile9
Decile10
1
1
1
1
1
1
Most likely
More profitable
Least likely
Less profitable
August 2011 by S. Balkan
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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
August 2011 by S. Balkan
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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
August 2011 by S. Balkan
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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
August 2011 by S. Balkan
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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)
August 2011 by S. Balkan
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