Wei CHEN

Date of Award

2007

Degree Type

Thesis

Degree Name

Master of Philosophy (MPHIL)

Department

Marketing and International Business

First Advisor

Prof. Geng CUI

Second Advisor

Prof. Tsang-sing CHAN

Abstract

Direct marketing problems have been intensively reviewed in the marketing literature recently, such as purchase frequency and time, sales profit, and brand choices. However, modeling the customer response, which is an important issue in direct marketing research, remains a significant challenge. This thesis is an empirical study of predicting customer response to direct marketing and applies a Bayesian approach, including the Bayesian Binary Regression (BBR) and the Hierarchical Bayes (HB). Other classical methods, such as Logistic Regression and Latent Class Analysis (LCA), have been conducted for the purpose of comparison. The results of comparing the performance of all these techniques suggest that the Bayesian methods are more appropriate in predicting direct marketing customer responses. Specifically, when customers are analyzed as a whole group, the Bayesian Binary Regression (BBR) has greater predictive accuracy than Logistic Regression. When we consider customer heterogeneity, the Hierarchical Bayes (HB) models, which use demographic and geographic variables for clustering, do not match the performance of Latent Class Analysis (LCA). Further analyses indicate that when latent variables are used for clustering, the Hierarchical Bayes (HB) approach has the highest predictive accuracy.

Keywords

Direct Marketing, Bayesian Methods, Bayesian Binary Regression, Hierarchical Bayes, Logistic Regression, Latent Class Analysis

Recommended Citation

Chen, W. (2007). Predicting customer responses to direct marketing: A Bayesian approach (Master's thesis, Lingnan University, Hong Kong). Retrieved from http://dx.doi.org/10.14793/mkt_etd.11

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