What is Predictive Modeling? - PowerPoint Presentation

Presentation on theme: "What is Predictive Modeling?"— Presentation transcript

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What is Predictive Modeling?Slide2

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.

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August 2011 by S. BalkanSlide3

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.

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August 2011 by S. BalkanSlide4

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.

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August 2011 by S. BalkanSlide5

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

Most likely

Least likely

More profitable

Less profitable

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August 2011 by S. BalkanSlide6

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 Campaign6August 2011 by S. BalkanSlide7

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

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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

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August 2011 by S. BalkanSlide9

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)

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August 2011 by S. Balkan