Uplift modeling, also known as incremental value modeling or persuasion modeling, is a predictive modeling technique used for separating the effects of direct marketing campaigns on a particular target population. The goal of uplift modeling is to identify the customers, from a given population, to whom a particular direct marketing campaign should be directed in order to maximize the incremental response. Uplift models can be applied to many different disciplines such as pricing, marketing and consumer behavior.
Uplift modeling methods can trace the path-to-purchase for buyers of products and services and can identify actions that will influence their likelihood of engaging further. It can be useful for pricing and product optimization, segmentation, optimizing personalization, and optimizing marketing mix.
Uplift modeling works by identifying customers who are likely to respond differently to a given direct marketing campaign. By identifying which customers are likely to respond positively to the campaign, a company can increase their return on investment by targeting those customers who are likely to be positively impacted by the campaign.
Uplift models compare the performance of two randomized marketing campaigns: a test campaign and a control campaign. The test campaign contains the campaign that customers are being exposed to, and the control campaign contains the same campaign but with no marketing dollars spent.
To ensure accuracy in the analysis, uplift models are often evaluated with techniques such as net lift, relative lift, and even-odds. Net lift measures the difference in response rate between the test and control campaigns. Relative lift measures the increase in response rate as a percentage of the control response rate. Even-odds measures the difference in lift as a ratio of an individual’s propensity to respond to the control and test campaigns.
Uplift modeling can be used to impact a number of different outcomes, such as website conversion rate optimization, increasing sales leads, and activation of dormant accounts. This technique is valuable to understanding the impact of marketing initiatives and offers businesses a powerful tool in maximizing the effectiveness of their marketing budgets.
