January 11, 2016

Targeting Variables

Here's how I approach a targeting variable.

Essentially, I weight historical demand by coefficients. 

In this model, I measured 12-month future spend on the basis of demand spent in the following increments ... 0-1 month ago ... 1-2 months ago ... 2-3 months ago ... 4-6 months ago ... 7-9 months ago ... 10-12 months ago ... 13-18 months ago ... 19-24 months ago ... 25-36 months ago ... and 37-48 months ago. Look at the coefficients.
  • One Month Demand = 0.668.
  • Two Month Demand = 0.584.
  • Three Month Demand = 0.521.
  • 4-6 Month Demand = 0.443.
  • 7-9 Month Demand = 0.344.
  • 10-12 Month Demand = 0.280.
  • 13-18 Month Demand = 0.201.
  • 19-24 Month Demand = 0.146.
  • 25-36 Month Demand = 0.093.
  • 37-48 Month Demand = 0.061.
Next, I divide each coefficient by the one month demand coefficient of 0.668.
  • One Month Demand = 100.0%
  • Two Month Demand = 87.4%
  • Three Month Demand = 78.0%
  • 4-6 Month Demand = 66.3%
  • 7-9 Month Demand = 51.5%
  • 10-12 Month Demand = 41.9%
  • 13-18 Month Demand = 30.1%
  • 19-24 Month Demand = 21.9%
  • 25-36 Month Demand = 13.9%
  • 37-48 Month Demand = 9.1%
So, if I am scoring the file today, and a customer purchased from a product category three months ago, I weight each dollar by 78%.

I do this for each targeting variable.

I know, I know, statistical gurus are going to tell you the 1,493 reasons why this isn't an appropriate methodology. Too bad.

Tomorrow, I will show you the targeting models, and then, I will describe how we use the targeting models in email marketing.