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Ten Reasons Why Models May Fail

Posted by phillippeng on September 14, 2009

Kent Leahy and Nethra Sambamoorthi list ten most common reasons why predictive models in marketing may fail. These top ten reasons are:

(1) Modeling strategy design. The person who will actually be building the model is not included in the initial discussions or design of the model.
(2) Model overfitting. The model has been “overfit” to the sample at hand ,and, consequently, does not generalize well to the actual mailing population, or is otherwise unreliable.
(3) Population shift due to environment changes. The circumstances surrounding the actual mailing change or the mailing environment turns out to be substantially different from the one on which the model was built.
(4) Model generalization too much. The model is used as though it were ‘generic’ or ‘universally applicable’.
(5) Population shift and model overfitting. Changes in the mailing environment in conjunction with the use of an ‘overfitted’ model.
(6) Model out-of-date. The model contains “post-event” variable(s), or those that occurred after the event you are trying to predict.
(7) Model validation and implementation. Not ‘test-scoring’ the model, or making an error when implementing the model.
(8) Sample selection QC. Failing to run an audit of the file as the first step in the model-building process.
(9) Miss the model expectation. A consensus on just exactly what the model is expected to predict (and for which audience) is not reached and/or well understood.
(10) Poor fanancial Planning. The model performs well but the mailing itself is not a financial ‘success’.

Reference: http://www.crmportals.com/crmnews/2002123.html

Posted in Marketing, Modeling | Leave a Comment »

[Book Reading] Marketing Metrics: 50+ metrics every executive should master

Posted by phillippeng on January 10, 2009

“Marketing Metrics: 50+ metrics every executive should master” is published by University of Pennsylvania Wharton School Publishing in 2006. The authors are Paul W. Farris, Neil T. Bendle, Phillip E Pfeifer and David J. Reibstein.

As the title suggested, the book discusses over 50 marketing metrics. These metrics are divided into 9 categories based on what they are measuring:

1. Share of hearts, minds and markets. (competitive analysis)
2. Margins and profits. (Profitability analysis)
3. Product and portfolio management
4. Customer profitability
5. Sales force and channel management
6. Pricing strategy
7. Promotion
8. Advertising media and web metrics
9. Marketing and Finance

At the age of customer centric, I will focus on sharing their more detailed discussions on customer profitability later.

Posted in Marketing | Leave a Comment »