Data Mining Weekly Assignment 6: LIFT; CRM; AFFINITY POSITIONING; CROSS-SELLING AND ITS ETHICAL CONCERNS.
What is meant by the term “lift”?
The term “lift” describes the improved performance of an exact or specific amount of effort on a modeled sampling, as opposed to a random sampling (Spang, 2010). In other words, if you are able to market via a model to say, a given number of random customers (e.g. 1000), and we expect that 50 of them would be successful, then a model that can generate 75 successes would have a 50 percent lift.
“Lift” is possibly the most commonly metric used to measure targeting model performance in marketing applications – the purpose of which, is to identify a subgroup or target from a larger population (Coppock, 2002 and Spang, 2010). The subgroup targeted or target members selected are those who are most likely to respond positively to a marketing offer.
As such, the model is doing well if as predicted – the response within the targeted section is much better than average when compared to the population as a whole. Lift then, is simply the ratio of these values: target response divided by average response (Coppock, 2002).
“Lift Charts” and “Lift Curves” are terms often seen in direct marketing. To quickly define them here – a lift curve is a popular technique which assigns a “probability of responding” score when used in an attempt to determine who the likely responders from a population are.
“The lift curve helps us determine how effectively we can “skim the cream" by selecting a relatively small number of cases and getting a relatively large portion of the responders” (Keating, 2013).
A lift chart or a “Gains Chart” is a convenient summary of all the cumulative lift curves whereby all the information in these multiple classification matrices are turned into a graph (Keating, 2013 and Coppock, 2002).
What is Customer Relationship Management (CRM)?
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” - Sam Walton (Founder of Wal-Mart)
Customer Relationship Management or CRM is a “company-wide business strategy” which is generally designed with the intent to “reduce costs and increase profitability by solidifying customer satisfaction, loyalty and advocacy” (CRM Magazine, 2010).
While once, it was regarded of as a type of software, today, CRM has evolved into a “customer-centric philosophy that must permeate an entire organization” (CRM Magazine, 2010).
In other words, it is not a new concept but as the quote above by Sam Walton suggests – an extremely important one that can and should be instinctively employed to all businesses to ensure returning and new clientele. We may perhaps think of CRM in its most basic, common and best known form as “customer services” or simply, methodology employed to create happy customers.
A true and effective CRM program revolves around three key elements – people, processes and technology (CRM Magazine, 2010). Targets within these elements that should be especially considered are individual applications, a data infrastructure to support them, and organizational changes to take full advantage of the technical upgrades (Goodhue et. al., 2002).
Moreover, the CRM program should be bringing in information from all relevant data sources both within, and outside the organization when applicable. In doing so, a company is able to gain a “holistic view of each customer in real time” (CRM Magazine, 2010), thus allowing staff dealing directly with customers, for example, in the realms of customer support, sales and marketing - the ability to make informed yet quick decisions on everything from cross-selling and upselling to target marketing strategies and competitive positioning tactics (Info Entrepreneurs, 2013 and CRM Magazine, 2010).
A working example of how CRM could be achieved may be through: discovering the purchasing habits,...
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