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Efficiently Evaluating Targeting Policies: Improving on Champion vs. Challenger Experiments

Author

Listed:
  • Duncan Simester

    (Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

  • Artem Timoshenko

    (Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

  • Spyros I. Zoumpoulis

    (INSEAD, 77300 Fontainebleau, France)

Abstract

Champion versus challenger field experiments are widely used to compare the performance of different targeting policies. These experiments randomly assign customers to receive marketing actions recommended by either the existing (champion) policy or the new (challenger) policy, and then compare the aggregate outcomes. We recommend an alternative experimental design and propose an alternative estimation approach to improve the evaluation of targeting policies. The recommended experimental design randomly assigns customers to marketing actions. This allows evaluation of any targeting policy without requiring an additional experiment, including policies designed after the experiment is implemented. The proposed estimation approach identifies customers for whom different policies recommend the same action and recognizes that for these customers there is no difference in performance. This allows for a more precise comparison of the policies. We illustrate the advantages of the experimental design and estimation approach using data from an actual field experiment. We also demonstrate that the grouping of customers, which is the foundation of our estimation approach, can help to improve the training of new targeting policies.

Suggested Citation

  • Duncan Simester & Artem Timoshenko & Spyros I. Zoumpoulis, 2020. "Efficiently Evaluating Targeting Policies: Improving on Champion vs. Challenger Experiments," Management Science, INFORMS, vol. 66(8), pages 3412-3424, August.
    • Handle: RePEc:inm:ormnsc:v:66:y:2020:i:8:p:3412-3424
    DOI: 10.1287/mnsc.2019.3379
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    References listed on IDEAS

    as
    1. Duncan I. Simester & Peng Sun & John N. Tsitsiklis, 2006. "Dynamic Catalog Mailing Policies," Management Science, INFORMS, vol. 52(5), pages 683-696, May.
    2. Bernd Skiera & Nadia Abou Nabout, 2013. "Practice Prize Paper ---PROSAD: A Bidding Decision Support System for Profit Optimizing Search Engine Advertising," Marketing Science, INFORMS, vol. 32(2), pages 213-220, March.
    3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
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    Cited by:

    1. Alex Chin & Dean Eckles & Johan Ugander, 2022. "Evaluating Stochastic Seeding Strategies in Networks," Management Science, INFORMS, vol. 68(3), pages 1714-1736, March.
    2. Carlos Fernández-Loría & Foster Provost, 2022. "Causal Decision Making and Causal Effect Estimation Are Not the Same…and Why It Matters," INFORMS Joural on Data Science, INFORMS, vol. 1(1), pages 4-16, April.
    3. Ngai, Eric W.T. & Wu, Yuanyuan, 2022. "Machine learning in marketing: A literature review, conceptual framework, and research agenda," Journal of Business Research, Elsevier, vol. 145(C), pages 35-48.
    4. Leif Nelson & Duncan Simester & K. Sudhir, 2020. "Introduction to the Special Issue on Marketing Science and Field Experiments," Marketing Science, INFORMS, vol. 39(6), pages 1033-1038, November.
    5. Arun Gopalakrishnan & Young-Hoon Park, 2021. "The Impact of Coupons on the Visit-to-Purchase Funnel," Marketing Science, INFORMS, vol. 40(1), pages 48-61, January.

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