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Data Mining Approach for Direct Marketing of Banking Products with Profit/Cost Analysis

Author

Listed:
  • Merve Mitik

    (Middle East Technical University)

  • Ozan Korkmaz

    (Middle East Technical University)

  • Pinar Karagoz

    (Middle East Technical University)

  • Ismail Hakki Toroslu

    (Middle East Technical University)

  • Ferhat Yucel

    (Intertech Bilgi Islem Ve Pazarlama Ticaret A.S.)

Abstract

Nowadays, many businesses, such as banks, use direct marketing methods to reach customers to minimize the campaigning cost and maximize the return rate. To achieve this, huge customer data should be analyzed to determine the most appropriate product offer for each customer and the most effective channel to reach her/him. However, since only a very small amount of responses collected from the customers are positive to the offers, the dataset is very imbalanced. This decreases sensitivity ratio of prediction results and makes it difficult to make a successful product and channel selection for the offer. In this paper, we propose a hybrid system, which first classifies the customers to decide if s/he is interested in the offered product, and then clusters them for product and channel suggestions. Experiments with real life banking data show very promising accuracy results for predicting the proper product and channel for the customers. Moreover, cost-profit analysis is also added to this problem. Our experiment results show that the proposed method decreases a fraction of the total profit, but since the decrease in the total cost is very large, there is a huge increase in the overall profit/cost ratio.

Suggested Citation

  • Merve Mitik & Ozan Korkmaz & Pinar Karagoz & Ismail Hakki Toroslu & Ferhat Yucel, 2017. "Data Mining Approach for Direct Marketing of Banking Products with Profit/Cost Analysis," The Review of Socionetwork Strategies, Springer, vol. 11(1), pages 17-31, June.
    • Handle: RePEc:spr:trosos:v:11:y:2017:i:1:d:10.1007_s12626-017-0002-5
    DOI: 10.1007/s12626-017-0002-5
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    References listed on IDEAS

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    1. Nueno, Jose Luis & Quelch, John A., 1998. "The mass marketing of luxury," Business Horizons, Elsevier, vol. 41(6), pages 61-68.
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    Cited by:

    1. Mahsa Samsami & Ralf Wagner, 2021. "Investment Decisions with Endogeneity: A Dirichlet Tree Analysis," JRFM, MDPI, vol. 14(7), pages 1-19, July.

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