Big Data, Data Mining, and Machine Learning: Value Creation for Business Leaders and Practitioners

CHAPTER 7 Incremental Response Modeling

A standard part of marketing campaigns in many industries is to offer coupons to encourage adoption of the new goods or service. This enticement is often essential for success because it provides some additional incentive to persuade customers to switch products if they are currently satisfied with the goods or service in question. For example, if I am a longtime buyer of laundry detergent XYZ, to get me to try a competitor’s laundry product detergent ABC, I will need some incentive great enough to get to move outside my comfort zone of buying detergent XYZ on my trips to the store. This incentive or inducement could be superior performance, but I will never know that the performance is superior unless I try the product. Another inducement could be value. Detergent ABC cleans just as well as detergent XYZ, and I get a larger quantity of detergent ABC for the same price as detergent XYZ. This strategy, like superior quality, is also predicated in me trying the product. All strategies that will successfully convert from detergent XYZ to detergent ABC require me to try the product, and the most common way to do that is to give me a coupon. Coupons are very common for most household products and packaged foods. These coupons can, in some cases, be successful in changing buying behavior from one product to another product. Now consider this alternative case: I have been buying detergent XYZ regularly, but I am not very happy with it and I ...