2014 Analytical Strategy

October, 2014

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CHALLENGE
Huntington Bank has leveraged SourceLink R/NR models with good results. The
challenge now is to identify targets for incremental lift and profit maximization. Culturally,
there is a strong focus on response and # of new accounts, so those measurements will
continue to be key to success. At the same time, there is an appetite to try other targets
and modeling methodologies to improve the overall health of the customer portfolio. By
nature, models targeting things other than response will perform lower on traditional
measurements than those models built to predict those measurements, so the challenge
is to develop an analytical plan that balances both the models and methodologies which
have historically had good results with new approaches designed to meet other business
objectives such as net lift, customer profitability, and retention.

SOLUTION
Our recommended solution is a 3 Step Process.
1. Analyze historical results
2. Suppress the lowest performers
3. Maximize customer portfolio mix
Analyze
Analyze historical campaign results for Direct Marketing Channels. Look for
opportunities to improve results with Contact Strategy.
Historical campaign analysis
1. Frequency
2. Cadence
3. Response Patterns
4. Seasonality

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Suppress
Suppression modeling and analysis
1. Chronic non-responders
2. Net lift model leveraging 3 unproductive quadrants
3. Cannibalization analysis/model
4. Unprofitables

Low profit

High risk

Resource hogs

Maximize
Increase overall profitability by making a profit trade off (swap = quantities / dogs for
dollars).
Replace suppressed quantities with models targeting uplift, affluent customers, multiproduct, retention, etc. The approach would be based on a combination of
understanding your top objectives to determine targets and then testing different
models and methodologies.
* Critical to this approach is measuring the success of the maximization
models against the lowest tier of contacts for which you are making the
tradeoff. Rather than being measured based on prior successful campaigns
(which is an impossible measure to match when the measurements are based
on those elements being the target), the new models are measuring on the
lower benchmark did you make a good tradeoff? So if the bottom 25% had
a .5% response rate and now you can identify a new bottom that will also have
a .5% response rate but will perform better on other attributes, the net result
over time will be a stronger customer portfolio.
o

High average order / high frequency

Lifetime value

Multi-product

High retention

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Mass/Ultra Affluent

Crosslink cross sell model

Uplift / Net Lift

Uplift Modeling
SourceLink has been tasked with developing a new approach to improve the net lift
for the HNB DDA Checking campaign while still meeting new account opening goals.
SourceLink has developed several options to look at to accomplish this goal.
Geographical Uplift Model
One option would be to build a Geographical Uplift Model. The Geographical Uplift
Model would still use the combination of the Responder/Non-Responder (RNR) and
SMART models to score the universe to keep a strong focus on response and
bringing in new accounts. To optimize for net lift, we would include two new
variables within the model focusing on the mail response penetration and control
response penetration. The areas with a high mail response penetration would get
more weight in the scoring which should push those records into the top deciles.
The areas with a higher control response penetration would get less weight to move
those records into the lower deciles decreasing the likelihood those records get
mailed. With higher mail response areas getting more mail the mail response should
increase while the control response decreases therefore increasing the net lift while
still bringing in a high number of DDA accounts.
Decision Tree Selection
Another option is to build an Uplift Decision Tree Model. The Uplift Tree Model would
use a combination of Responder/Non-Responder to create a single model that
combines treatment and control populations. The model is optimized to make
splitting decisions based on the significance of each splitting criteria. We would fit a
linear model to each candidate split that measures the overall effect of the treatment
given the interaction of the treatment and the split. This method allows us to focus
on decision rules that will identify groups of prospects that are most likely to be

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positively affected by mailers and identify groups that the mailers will hurt. By
combining models for the treatment and control group into one model we should be
able to decrease the amount of error in the model as opposed to creating two
separate models.
SAS Incremental Response Model
Our final option is to build an Incremental Response Model. The Incremental
Response Model begins with the selection of variables. It would choose the best
variables (and interactions between variables) by measuring the net weight of
evidence (NWEO) and net information value (NIV). The top 10% (or so) of variables,
as ranked by NWOE and NIV, would be chosen and used to create a model for the
treatment group and a model for the control group. The universe would be scored
and the difference between these two models would be the net lift for the prospect.
This would allow us to identify the most persuadable prospects. The overall
response rate from an individual campaign would decrease but it would be under the
assumption that those identified as already likely to be customers not sent the
mailing will become customers anyway. The cost per new customer will decrease
and ROI will increase.
Sister Products to Consider
The following SourceLink products can also be leveraged to significantly improve the
strategies outlined above.
1

Customer segmentation / Profiling

Campaign optimizer multivariate testing

Variable digital print VDP

BENEFITS
The benefits of this approach are that HNB can continue to leverage models and
methodologies that have been successful while identifying new opportunities for
significant incremental gain in the overall health of the customer portfolio. Rather than

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focusing exclusively on response, HNB can to leverage some quantity of mail circulation
against other business objectives like retention, share of wallet, and overall profitability.
Because it is a tradeoff approach, this can be accomplished without a drop in results or
an increase in costs.

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