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Question Selection Responding to Information on Customers from Heterogeneous Populations in Selecting Offers that Maximizes Expected Profit

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Abstract

The advent of Internet broking pages now allows borrowers to "apply" to a number of different companies at one time. This allows a customer to have multiple offers of a particular personal financial product and to choose one that best fits his current needs. The saturated condition of the personal financial products has lead to falling "take" rates. Hence financial institutions are trying to increase the "take" rates of their personal financial products. Since applicants for credit will have to provide information for the risk assessment process, such information can also be used to assess the probability of a customer accepting an offer. Interactive channels such as the Internet and telephone allow questions that are asked to depend on the previous answers. But lenders would not want to make the application process too complicated so as to not burden the customer. The questions that are selected need to provide information to assess the probability of acceptance of a particular variant of financial product. Once the customer provides a response, which offer do we extend for each response? In this paper, we investigate a model to predict the best offer to extend next to a customer, based on the response given for the questions. We will also be looking at which questions should be asked.

Suggested Citation

  • Hsin-Vonn Seow, 2008. "Question Selection Responding to Information on Customers from Heterogeneous Populations in Selecting Offers that Maximizes Expected Profit," NUBS Malaysia Campus Research Paper Series 2008-12, Nottingham University Business School Malaysia Campus.
    • Handle: RePEc:nom:nubsmc:2008-12
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