APPLICATION OF DATA MINING FOR

DIRECT MARKETING
A Seminar Report
Submitted by
V S MURTHY
In partial fulfillment for the award of the degree
0f
BATCHELOR OF TECHNOLOGY
IN
INFORMATION TECHNOLOGY&ENGINEERING

At
BVC Institute Of Technology & Science
Department of CSE & IT
AMALAPURAM
NOVEMBER-2010

ABSTRACT
Most data mining Algorithms and Tools when applied to Industrial problems such as
CRM(Customer Relationship Management) are useful in pointing out customers who are likely
attritors and customers who are Loyal,but they require human experts to post process the
discovered knowledge manually for Campaigning.This separation of the data mining and
Campaign management software introduces considerable inefficiency and opens the door for
human errors.Tightly integrating the two disciplines present an opportunity for companies to gain
competitive advantage.

Many industries follow two approaches to sell their products and

services.The first approach is mass marketing which uses mass media such as TV,Radio and
Newspapers to advertisement is less effective.

Another approach of promotion is direct marketing.Instead of promoting to customers

indiscriminatively,direct marketing studies charecertistices and needs and select certain
customers,in out case Unloyal(who likely to be loyal in near future)as a target for promotions.For
collecting huge amount of information on customers is kept in database,data mining application
csn be effective for direct marketing.Data mining uses different techniques to automate the
process of searching the huge amount of data to find patterns that are good predictors of
purchasing behaviors.After mining the data,marketers feed the results into compaign
management software which manages the compaign directed at the defind market segments.It
also calculate the Net Profit after this promotions.

TABLE OF CONTENTS

CHAPTER NO. TITLE PAGE NO.

ABSTRACT ii

ACKNOWLEDGMENT iii

• INTRODUCTION
• DATA MINING
2.1 Defination
2.2 Purpose of datamining
2.3 Scoring the model
3. DIRECT MARKETING
3.1 Defination
3.2 Types of direct marketing
3.3 Direct marketing working
3.4 Diff between direct marketing&adv.
4. SOME DEFINATIONS
4.1 A Datawarehouse
4.2 Database marketing
4.3 Compaign management
4.5 Scoring on the fly or dynamic scoring
4.6 Attrition
 5. DATA MINING TECHNIQUES
5.1 Supervised classification
5.2 Decision tree
5.2.1 Building of decision tree
5.2.2 C4.5 algorithm
5.2.3 Advantages
5.2.4 Applications
6. COMPAIGN MANAGEMENT SOFTWARE
7. INCREASING CUSTOMER VALUE
8. INTEGRATING DATAMINING&COMPAIGN
MANAGEMENT SOFTWARE(CMS)
9. PROBLEM DEFINATION & SOLUTIONS
10. DATA MINING DEVELOPMENT PROCESS
10.1 Training data
10.2 Entropy Or Information gain
10.3 Cost matrix & Net profit calculation
11. DATAMINING&COMPAIGN MANAGEMENT
IN THE REAL WORLD
11.1 Evaluating the Data mining model(DMM)
11.2 Results
12. BENEFITS OF INTEGRATING DMM & CMS
13. CONCLUSION
REFERENCES

INTRODUCTION
Almost all industries that sell products and services need to advertise and promote their products
and services.Banks,Insurance companies and retail stores are typical examples.There are
generally two approaches to advertisement and promotions:Mass Marketing which uses mass
media such as TV,Radios and Newpapers.However todays world where products are
overwhelming and the market is highly competitive,mass marketing is less effective.The second
Approach of promotion is direct marketing.Instead of promoting to customers
indiscriminatively,direct marketing studies customer characterstices and needs and select certain
customers,in our case Unloyal as a target for promotions.

Now a days,huge amount of information on customers is kept in database.Thus

data mining can be very effective for direct marketing. To be successful, database marketers
must, first, identify market segments containing customers or prospects with high profit potential
and, second, build and execute campaigns that favorably impact the behavior of these
individuals.
The first task, identifying market segments, requires significant data about prospective customers
and their buying behaviors. In theory, the more data the better. In practice, however, massive data
stores often impede marketers, who struggle to sift through the minutiae to find the nuggets of
valuable information.Recently, marketers have added a new class of software to their targeting
arsenal;Data mining application automate the process of searching the huge of data to find
patterns that are good predicators of purchasing behaviors.After mining the data,marketers must
feed the results into campaign management software that,as the name implies,manages the
campaign direct at the defined market segments.

Data mining,an integration of machine learning,computer visualization and

statistics,has been widely used in direct marketing to target customers.
DATA MINING:
Data Mining definition:
Data Mining, by its simplest definition, automates the detection of relevant patterns in a
database. For example, a pattern might indicate that married males with children are twice as
likely to drive a particular sports car than married males with no children. If you are a marketing
manager for an auto manufacturer, this somewhat surprising pattern might be quite valuable.
However, Data Mining is not magic. For many years, statisticians have manually "mined"
databases looking for statistically significant patterns.
Today, Data Mining uses well-established statistical and machine learning techniques to build
models that predict customer behavior. The technology enhances the procedure by automating
the mining process, integrating it with commercial data warehouses, and presenting it in a
relevant way for business users.
The leading Data Mining products, such as those from companies like SAS and IBM, are now
more than just modeling engines employing powerful algorithms. Instead, they address the
broader business and technical issues, such as their integration into today’s complex information
technology environments.
In the past, the hyperbole surrounding Data Mining suggested that it would eliminate the need
for statistical analysts to build predictive models. However, the value that an analyst provides
cannot be automated out of existence. Analysts will still be needed to assess model results and
validate the reasonability of the model predictions. Since Data Mining software lacks the human
experience and intuition to recognize the difference between a relevant and an irrelevant
correlation, statistical analysts will remain in high demand.
 
The purpose of Data Mining
Data Mining helps marketing professionals improve their understanding of customer behavior. In
turn, this better understanding allows them to target marketing campaigns more accurately and to
align campaigns more closely with the needs, wants and attitudes of customers and prospects.
If the necessary information exists in a database, the Data Mining process can model virtually
any customer activity. The key is to find patterns relevant to current business problems.
Typical questions that Data Mining answers include:
• Which customers are most likely to drop their cell-phone service?
• What is the probability that a customer will purchase at least $100 worth of merchandise
from a particular mail-order catalog?
• Which prospects are most likely to respond to a particular offer?
Answers to these questions can help retain customers and increase campaign response rates,
which, in turn, increase buying, cross-selling and return on investment (ROI).
 

Scoring the model

Data Mining builds models by using inputs from a database to predict customer behavior. This
behavior might be attrition at the end of a magazine subscription, cross-product purchasing,
willingness to use an ATM card in place of a more expensive teller transaction, and so on.
The prediction provided by a model is usually called a score. A score (typically a numerical
value) is assigned to each record in the database and indicates the likelihood that the customer
whose record has been scored will exhibit a particular behavior.
DIRECT MARKETING:
1.What is Direct Marketing?
Direct marketing is just what it sounds like - directly reaching a market (customers and potential
customers) on a personal (phone calls, private mailings) basis, or mass-media basis
(infomercials, magazine ads, etc.).
Direct marketing is often distinguished by aggressive tactics that attempt to reach new customers
usually by means of unsolicited direct communications. But it can also reach out to existing or
past customers. A key factor in direct marketing is a "call to action." That is, direct marketing
campaigns should offer an incentive or enticing message to get consumers to respond (act).
Direct marketing involves the business attempting to locate, contact, offer, and make incentive-
based information available to consumers.
2. Types of Direct Marketing
Three main types of direct marketing include:
• Telemarketing: Direct marketing that involves calling people at home or work to ask for
donations, an opinion, or for sales purposes.
• Email Direct Marketing: This form of direct marketing targets consumers through their
Email accounts. Email addresses can be harvested from websites, forums, or purchased.
Some companies require you to receive announcements to use their websites.
• Direct Mail Marketing: Advertising material sent directly to home and business
addresses.
Other types of direct marketing include: distributing flyers; door-to-door solicitations; curbside
stands; FAX broadcasting; television marketing (i.e., infomercials); coupon ads in print media;
and voice mail marketing.
3. Does Direct Marketing Work?
That depends on how you define "work." Direct marketing does ensure people know about your
business. But aggressive, misleading, or annoying direct marketing can leave people with a bad
impression about your business.
Be sure to adhere to privacy and contact laws because there are stiff fines and penalties for direct
marketers that violate direct marketing laws.
4. Should I Consider Direct Marketing?
Every business owner should consider direct marketing. However, the type of direct marketing
that will work for your business depends on your industry, your business ethics, and your budget.
Is There a Difference Between Marketing and Advertising?
There are many technical and complicated definitions of both advertising and marketing and the
differences between them. But it can be stated rather simply:
• Advertising tells a story about something to attract attention. Advertising is a step in the
marketing process.
In business, “marketing” is the planning of, and steps taken, to bring merchants and consumers
together. s for a targeted marketing campaign.

Some Definitions:
1..A data warehouse is a repository for relevant business data. While traditional databases
primarily store current operational data, data warehouses consolidate data from multiple
operational and external sources in order to attain an accurate, consolidated view of customers
and the business.
2.Database Marketing uses information in computerized databases to target offerings to
customers and prospects.
3.Campaign Management uses information in a data warehouse or marketing database to plan,
manage and assess marketing campaigns designed to impact customer behavior.
4.A customer segment is a group of prospects or customers who are selected from a database
based on characteristics they possess or exhibit.
5.Scoring on the fly or dynamic scoring is the ability to score an already-defined customer
segment within a campaign-management tool. Rather than scoring an entire database, dynamic
scoring works with only the required customer subsets, and only when needed.
6.Attrition, sometimes known as churn, occurs when a customer terminates his or her
relationship with a service provider. Marketing efforts usually focus on minimizing churn
because the cost of bringing a customer back is usually much greater than the cost of retaining
the customer in the first place.
Data mining techniques
Supervised Classification:
Classification is probably the most widely used data mining technique. Most decision making
models are usually based upon classification methods. These techniques, also called classifiers,
enable the categorisation of data (or entities) into pre-defined classes.It is separation or ordering
of objects(or things) into classes.Classifiction consists of training the system so that new objects
is presented to trained system it is able to assign the object to one of the existing classes.This
approach is called Supervised Learning.In supervised learning scheme it is assumed that we have
sufficient traning phase. There are many algorithms that can be used for classification, such as
decision trees, neural networks, logistic regression, etc.
Using this data mining technique, the data mining tool learns from examples or the data (data
warehouses, databases etc) how to partition or classify certain objects (it can be an object, an
action, or any other information, that can be formalised).  As a result, data mining software
formulates classification rules.
Decision tree:
A Decision tree is a popular classification technique that result in flowchart like tree structure
where each node denotes test on a attribute value and each branch represent classes.Using
Training data Decision tree generate a tree that consists of nodes that are rules and each leaf node
represent a classification or decision.The data usually plays important role in determining the
quality of the decision tree.If there are number of classes,then there should be sufficient training
data available that belongs to each of the classes.Decision trees are predictive models,used to
graphically organize information about possible options,consequences and end value.They are
used in computing for calculating probabilities.

Building a Decision tree:

Decision tree learning algorithms,such as ID3 or C4.5 are among the most powerful and popular
predictive methods for classification.In Direct Marketing applications,a Decision tree can be
built from a set of examples(customers) described by a rich set of attributes including customer
personal information such as name,sex and dirthday etc. financial information (annual
income,expenditure),purchase information (number of purchase made,logins made),feedback
information (product availability,service,cost of products)so on.
In this we implemented C4.5 algorithm,it is used to generate a decision tree developed by Ross
Quinlan.The decision tree generated by C4.5 used for classification.
C4.5 Algorithm:
C4.5 Builds decision tree from set of training data using the concept of Information entropy.The
training data is a set S=s1,s2…of already classified samples.Each sample si=x1,x2…is a vector
where x1,x2….represent attributes or features of the sample.The training data is augmented with
a vector C=c1,c2,..where c1,c2,… represent the class to which each sample belongs.At each node
of the tree,C4.5 choose one attribute of the data that most effectively splits its set of samples into
subsets enriched in one class or the other.Its criterion is the normalized information gain that
results from choosing an attribute for splitting the data.The data with the highest normalized
information gain is chosen to make the decision.The C4.5 algorithm then recourses on the
smaller sublists.In general,steps in C4.5 algorithm to build decision tree are:
1.Choose attribute for root node.
2.Create branch for each value of that attribute.
3.Split cases according to branches.
4.Repeat process for each branch until all cases in the branch have the same class.
Choosing which attribute to be a root based on highest gain of each attribute.To count the
gain,we use Information Gain formula
Gain(S,A)=Entropy(S)-∑(|St|/|S|)xEntropy(Si)…..(1)
Where {S1..Si…Sn}=partitions of S according to values of A.
N=Number of attributes A.
|Si|=Number of cases in the partition Si,
|S|=Total number of cases in S.
While Entropy is given by Formula 2
Entropy(S)= ∑-p
Where
S=Case set
n=Number of cases in the partition S,
pi=proportion of Si to S.
Decision tree advantages:
Amongst other data mining methods, decision tree is the method that has several advantages
• Intuitively comprehensible classification model. People are able to understand decision
tree models after a brief explanation.
• Data preparation for a decision tree is basic or unnecessary. Other data mining
methods often require data normalisation, dummy variables need to be created and blank
values to be removed.
• Rules generation in the fields where experts have difficulties with formalising their
knowledge.
• Decision tree is a white box model. If a given situation is observable in a model the
explanation for the condition is easily explained by boolean logic. An example of a black
box model is an artificial neural network since the explanation for the results is
excessively complex to be comprehended.
• It is possible to validate a model using statistical tests, neural nets and others. That
makes it possible to account for the reliability of the model.
• Is robust, perform well with large data in a short time. Large amounts of data can be
analysed using personal computers in a time short enough to enable stakeholders to take
decisions based on its analysis.
Because of these and many other reasons, decision trees technique is an important data mining
method for any scientist dealing with data analysis, no matter if he is a theorist or an expert.
FIELDS of Decision Trees Applications:
 Decision trees are an excellent tool in decision-making
and data mining systems. They can be of good service to any analyst or  manager.In business,
decision trees are constructed in order to help with decision  making process.Decision trees are
successfully used to solve real-world problems in the following fields:
• Banking. Estimation of clients’ creditworthiness when giving credits.
• Industry. Production quality control (faults identification), non-destructive tests (like
checking weld quality), etc.
• Medicine. Diagnostics of various diseases.
• Molecular biology. Analysis of amino acids composition.
This is by no means full list of the fields where decision trees can be of use.
The role of Campaign Management software:
Database marketing software enables companies to deliver to customers and prospects timely,
pertinent, and coordinated messages and value propositions (offers or gifts perceived as
valuable).
Today’s Campaign Management software goes considerably further. It manages and monitors
customer communications across multiple touch-points, such as direct mail, telemarketing,
customer service, point-of-sale, e-mail and the Web.
Campaign Management automates and integrates the planning, execution, assessment and
refinement of possibly tens to hundreds of highly segmented campaigns running monthly,
weekly, daily or intermittently. The software can also run campaigns that are triggered in
response to customer behavior or milestones – such as the opening of a new account.
 
Increasing customer lifetime value
Consider, for example, customers of a bank who only use the institution for a checking account.
An analysis reveals that after depositing large annual income bonuses, some customers wait for
their funds to clear before moving the money quickly into their stock-brokerage or mutual fund
accounts outside the bank. This represents a loss of business for the bank.
To persuade these customers to keep their money in the bank, marketing managers can use
Campaign Management software to immediately identify large deposits and trigger a response.
The system might automatically schedule a direct mail or telemarketing promotion as soon as a
customer’s balance exceeds a predetermined amount. Based on the size of the deposit, the
triggered promotion can then provide an appropriate
incentive that encourages customers to invest their money in the bank’s other products.
Finally, by tracking responses and following rules for attributing customer behavior, the
Campaign Management software can help measure the profitability and ROI of all on going
campaigns.

 
Integrating Data Mining and Campaign Management
The closer Data Mining and Campaign Management work together, the better the business
results. Today, Campaign Management software uses the scores generated by the Data Mining
model to sharpen the focus of targeted customers or prospects, thereby increasing response rates
and campaign effectiveness.
Unfortunately, the use of a model within Campaign Management today is often a manual, time-
intensive process. When someone in marketing wants to run a campaign that uses model scores,
he or she usually calls someone in the modeling group to get a file containing the database
scores. With the file in hand, the marketer must then solicit the help of someone in the
information technology group to merge the scores with the marketing database.
This disjointed process is fraught with problems:
• The large numbers of campaigns that run on a daily or weekly basis can be difficult to
schedule and can swamp the available resources.
• The process is error prone; it is easy to score the wrong database or the wrong fields in a
database.
• Scoring is typically very inefficient. Entire databases are usually scored, not just the
segments defined for the campaign. Not only is effort wasted, but the manual process
may also be too slow to keep up with campaigns run weekly or daily.
The solution to these problems is the tight integration of Data Mining and Campaign
Management technologies. Integration is crucial in two areas:
First, the Campaign Management software must share the definition of the defined campaign
segment with the Data Mining application to avoid modeling the entire database. For example, a
marketer may define a campaign segment of high-income males between the ages of 25 and 35
living in the northeast. Through the integration of the two applications, the Data Mining
application can automatically restrict its analysis to database records containing just those
characteristics.
Second, selected scores from the resulting predictive model must flow seamlessly into the
campaign segment in order to form targets with the highest profit potential.

The integrated Data Mining and Campaign Management process:

 

This section examines how to apply the integration of Data Mining and Campaign Management
to benefit the organization. The first step creates a model using a Data Mining tool. The second
step takes this model and puts it to use in the production environment of an automated database
marketing campaign.
Step 1: Creating the model
An analyst or user with a background in modeling creates a predictive model using the Data
Mining application. This modeling is usually completely separate from campaign creation. The
complexity of the model creation typically depends on many factors, including database size, the
number of variables known about each customer, the kind of Data Mining algorithms used and
the modeler’s experience.
Interaction with the Campaign Management software begins when a model of sufficient quality
has been found. At this point, the Data Mining user exports his or her model to a Campaign
Management application, which can be as simple as dragging and dropping the data from one
application to the other.
This process of exporting a model tells the Campaign Management software that the model
exists and is available for later use.
Step 2: Dynamically scoring the data
Dynamic scoring allows you to score an already-defined customer segment within your
Campaign Management tool rather than in the Data Mining tool. Dynamic scoring both avoids
mundane, repetitive manual chores and eliminates the need to score an entire database. Instead,
dynamic scoring marks only relevant customer subsets and only when needed.
Scoring only the relevant customer subset and eliminating the manual process shrinks cycle
times. Scoring data only when needed assures "fresh," up-to-date results.
Once a model is in the Campaign Management system, a user (usually someone other than the
person who created the model) can start to build marketing campaigns using the predictive
models. Models are invoked by the Campaign Management System.
When a marketing campaign invokes a specific predictive model to perform dynamic scoring,
the output is usually stored as a temporary score table. When the score table is available in the
data warehouse, the Data Mining engine notifies the Campaign Management system and the
marketing campaign execution continues.
Problem Definition and Solutions
Problem Definition:Campaigning
The Business for example Mobile store that sell products like Mobile Phones,ipods and so
on,collects huge amount of information on customers and kept in databases.The response rate,the
percent of customers who actullay buy the product after visiting the site or login,is often low.For
effective selling of these products there two cases:
1.Transfer this database to campaign management software which suggest actions considering
current market segments.
2.Mass Marketing i.e. Paper media(newspaper,letters,fax),Electronic Media(TV
Commercials,Radio,email,SMS’s)irrespective of the customer status such as Loyal or
Unloyal.However in Today’s world where products are overwhelming and marketing is highly
compietative,The responses rate ,the percent of the people who actually buy the product after is
often low.Both the solutions are not cost effective.
Reality of business:
1.it is more expansive to win back a customer after they left thanit is keep them satisfied in the
first place.
2.Companies must spend far more money to get a new customer than to retain as existing
customer.
3.it is far easier to sell a new product to an existing customer than it is to a new customer.
Solutions:Direct marketing using data mining
Instead of promoting to customer indiscriminatively,direct marketing studies customer profile
and select certain customers (Unloyal) as target for promotions.This application increase the net
profit by decreasing campaign cost.The DFD(Data Flow Diagram)for this application is show in
fig1.
Data mining model development process
Traning data:For building a data mining model we consider an artificial example of building
decision tree classification model for online mobile store as show in table 1.There are 12 samples
and two classes.The frequencies of two classes are:Yes=7 No=5
Customer Gender Availability Product is References No.of Status Select for
type of product reasonable made logins campaign

Individual Male Satisfied True 3 8 Loyal No

Retailer Male Satisfied True 0 7 Loyal No

Individual Male Satisfied True 5 1 Unloya Yes

l

Distributo Male Unsatisfied True 2 2 Unloya Yes

r l

Distributo Female Satisfied False 3 2 Unloya Yes

r l

Individual Male Unsatisfied True 4 3 Loyal No

Individual Male Satisfied True 2 3 Unloya Yes

l

Individual Male Satisfied True 5 5 Loyal No

Distributo Female Satisfied False 2 4 Unloya Yes

r l

Distributo Female Unsatisfied False 1 2 Unloya Yes

r l

Retailer Female Unsatisfied False 0 3 Unloya Yes

l

Retailer Female Satisfied False 0 1 Unloya No

l

Table 1:Training data for online mobile store

Entropy or information gain:
Information gain or entropy in data due to uncertainty of customer regarding the risk class each
customer belongs to is given by,
E=-(7/12)log(7/10)-(5/12)log(5/12)=0.98
Similarly we consider using each attribute in turn as a candidate to split the sample.By
using formula 1 & 2 in C4.5 algorithm we got values of Gain(S,A) and Entropy(S) a shown in
table 2.
The Gain at attribute status in larger than any other attribute,hence status is a split attribute.Now
we reduce the data by removing the attribute status the decision terr building algorithm given
earlier continues until either all leaf nodes are single nodes or no more attribute are available for
splitting a node that has objects of more than one class.
Potential split attribute Entropy before split Entropy after split Gain

Customer type 0.98 0.632 0.348

Gender 0.98 0.812 0.162

Availability of product 0.98 0.573 0.407

Cost is reasonable? 0.98 0.820 0.160

Reference made 0.98 0.586 0.394

No of logins 0.98 0.592 0.388

Status 0.98 0.542 0.438

Table 2:Gain calculation for seven attribute

Cost matrix & net profit calculation:
Actions:In order to change the classification of a customer X from loyal and unloyal, one may
need to apply more than one attribute-value change action. An action A is defind as a change to
an attribute value fir as attribute ‘attr’.
Suppose that for a customer X,the attribute ‘attr’ has an original value u.To change its value to
v,an action is needed,U is probability that we got,V is what we expecting.
Therefore action A is to be taken on customer so that he is loyal,and profit is also not affected.
This action A is defind as A=(attr,u-v).
Cost matrix: . To improve classification decision trees and to get better models with such
'skewed data', the Tree heuristic automatically generates an appropriate cost matrix to balance the
distribution of class labels when a decision tree is trained. You can also manually adjust the cost
matrix.
A cost matrix (error matrix) is also useful when specific classification errors are more severe
than others. The Classification mining function tries to avoid classification errors with a high
error weight. The trade-off of avoiding 'expensive' classification errors is an increased number of
'cheap' classification errors. Thus, the number of errors increases while the cost of the errors
decreases in comparison with the same classification without a cost matrix.
Here we calculating the probability for each customer respectively. Then on the basis of this we
classify then as Loyal or Unloyal. Afterwards we have taken action for a particular Unloyal
customer for that we have to specify values like cost for action,destination probability and total
profit accordingly we calculate the net profit, for that we use the following formulas
Probability=Destination probability-Customer probability
Then,
Net profit=(total profit*(Probability))-cost of action
Data Mining and Campaign Management in the real world
Ideally, marketers who build campaigns should be able to apply any model logged in the
Campaign Management system to a defined target segment. For example, a marketing manager
at a cellular telephone company might be interested in high-value customers likely to switch to
another carrier. This segment might be defined as customers who are nine months into a twelve-
month contract, and whose average monthly balance is more than $150.
The easiest approach to retain these customers is to offer all of them a new high-tech telephone.
However, this is expensive and wasteful since many customers would remain loyal without any
incentive.
Instead, to reduce costs and improve results, the marketer could use a predictive model to select
only those valuable customers who would likely defect to a competitor unless they receive the
offer.
 
Evaluating the Benefits of a Data Mining Model
Figure 1-1, which shows a "gains chart," suggests some benefits available through data mining.
The diagonal line illustrates the number of responses expected from a randomly selected target
audience. Under this scenario, the number of responses grows linearly with the target size.
Figure 1-1Gains Chart

 
The top curve represents the expected response if you allow the model scores to determine the
target audience. The target is now likely to include more positive responders than in a random
selection of the same size. The shaded area between the curve and the line indicates the quality
of the model. The steeper the curve, the better the model.
 
Other representations of the model often incorporate expected costs and expected revenues to
provide the most important measure of model quality: profitability. A profitability graph such as
Figure 1.2 can help determine the number of prospects to include in a campaign.
 
Figure 1-2
Profitability Chart

 
In this example, it is easy to see that contacting all customers will result in a net loss.
Results:
The application proposed in this paper is combination of data mining and campaign management
which increases net profit,we are proposing this using the following table3.
Table :Net profit Estimation

Previous system Our application

Number of customers selected for campaign 1,00,000 30,000(30%)

 Campaign cost(TV,radio etc) 1,00,000.00(Rs) 0.00

Data mining software&campaign management software cost 80,000.00(separated) 50000.00(combine)

A-total promotion cost(Rs) 1,80,000.00 50,000.00

Response rate 1% 3%

Number of sales 1000 900

B-profit from sales(Rs.70 each) 70,000.00 63,000.00

Net profit from promotion(A-B) -1,10,000.00 13000.00

Lift analysis has been widely used in database marketing previously.A lift reflects the
redistribution of responders in the testing data after they are ranked,using this lift curve for our
application,we are proposing that selecting number of customers between 10% to 30% who are
Unloyal will give Maximum Net Profit.

The Benefits of integrating Data Mining and Campaign Management:

For marketers:
• Improved campaign results through the use of model scores that further refine customer
and prospect segments.
Records can be scored when campaigns are ready to run, allowing the use of the most recent
data. "Fresh" data and the selection of "high" scores within defined market segments improve
direct marketing results.
• Accelerated marketing cycle times that reduce costs and increase the likelihood of
reaching customers and prospects before competitors.
Scoring takes place only for records defined by the customer segment, eliminating the need to
score an entire database. This is important to keep pace with continuously running marketing
campaigns with tight cycle times.
Accelerated marketing "velocity" also increases the number of opportunities used to refine and
improve campaigns. The end of each campaign cycle presents another chance to assess results
and improve future campaigns.
• Increased accuracy through the elimination of manually induced errors. The Campaign
Management software determines which records to score and when.
For statisticians:
• Less time spent on mundane tasks of extracting and importing files, leaving more time for
creative – building and interpreting models. Statisticians have greater impact on
corporate bottom line.

CONCLUSION:
Our proposed application have powerful capabilities that will benefited for companies
doing online business statisties released by the European Union’s Eurostat data agency
indicate that in 2003,32 percent of individuals aged between 16 and 74 bought at least
one item or service on the internet within the past twelve months.Those aged between 25
and 34 accounted for the highest share of online purchase will definitely increase in
future too. Today the business world is facing a recession and applying techniques such
as Deduction in man power,salary,other Miscellaneous expenses to stay profitable. Our
application is powerful solution to stay profitability in recession.
REFERENCES:

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