Generating Incremental Sales: Maximizing the incremental impact of cross-selling, up-selling and deep-selling through uplift modelling

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Abstract

There is a subtle but important difference between
targeting people who are likely to buy if they are included in a campaign
and
targeting people who are only likely to buy if they are included in a campaign.
It transpires that this single-word distinction is often the difference between a strongly profitable and a severely loss-making campaign. We have seen many cases in which moving to targeting on the second basis (for incremental sales) has more than doubled the extra sales generated by a campaign. Conventional “response” models—despite their name—target on the former basis, and have a marked tendency to concentrate on people who would have bought anyway, thus misallocating marketing resources by increasing costs and failing to maximize sales. This paper discusses the use of a radical new type of predictive modelling—uplift modelling—that allows campaigns to be targeted on the second basis, i.e. so as to maximize incremental sales from cross-sell, up-sell and other sales-generation campaigns.