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How to use Propensity Score Matching in Marketing (And Save Money!)

By: Andrew Glover
July 8, 2019

Perfect contact to the right people is a marketer’s dream. It’s essential for you to reach your member’s through the right channel at the right time as well. Every organization should strive to achieve a level of hyper-personalization, but there are still many organizations that desire a one-size-fits-all marketing approach. Propensity score matching can help organizations that want to market with a personalized approach, but can also help convert the one-size-fits-all folks.

Propensity score matching can help your organization save money, as well. The propensity approach narrows down your target audience to a more granular level. The narrowed results allow you to send materials to more specified groups. You will save money because your materials are going to be received and read by the right people every time.

What Is Propensity Score Matching?

Propensity score matching will give you the ability to identify high-value audiences which have the highest likelihood of specific actions including conversion, email opens, and responses, or who are the most likely to pick up a phone and give you a call.

Propensity score gives organizations a way to identify the best candidates for their marketing efforts. Organizations can make more informed marketing purchase decisions when they choose to use propensity score matching.

Using Propensity Score Matching

Propensity score matching is a new way to predict marketing decisions. Propensity scores are usually computed using logistic regression, with group (treatment) status regressed on observed baseline characteristics including age, gender, and behaviors of relevance to the research. Logistical regression isn’t the only method available, though. You can also utilize probit analysis, discriminant analysis, tree-based methods, and other techniques.

Propensity scores can be used to build matched samples. You can match one-to-one or one-to-many. Each subject can be matched to more than one control subject as well. Then the matched samples are used in subsequent analyses to estimate the effect size of the treatment. Several matching algorithms are available. Once a matched sample is selected, you can determine what would have been had you employed an experimental design.

Then, based on the results, you can choose to initiate a marketing plan for the individuals targeted in your algorithm. This allows you only to select a project that will provide notable results.

How to Save Money

Propensity score matching in marketing can help you save money in several ways. Since propensity score matching finds the right person for you based on a variety of statistics, you will always send marketing materials to the ideal type of person based on multiple data points. You can eliminate the guesswork with this method, which allows you to avoid wasting marketing funds on a project that may not work. Eliminating guesswork is what enables you to save the most money when you are preparing and implementing a marketing project.

Direct Mail and Propensity Scoring

If you know your prospective member’s likelihood—or propensity—to engage with direct mail, you will have greater success with direct mail marketing projects. Propensity modeling is a proven technique. Medical research and direct marketing are some of the fields that have used propensity scoring.

You improve your ROI by using propensity scores thanks to more a more informed profile of member wants and needs, as well as a better understand who which members are more likely to respond. Propensity scores take segmentation to the next level by continually monitoring a member’s behavior and adjusting marketing campaigns based on matched behaviors. So, every time you prepare mailers, you can check the propensity scores and re-evaluate who you will market to each time.

Propensity Model Benefits

Propensity models can be beneficial for your organization in multiple ways:

  • They are dynamic
  • The model evolves with trends
  • There are data pipelines and feedback loops
  • The models undergo productionization, moving from the idea phase to mass-production fairly quickly
  • You can receive predictions, and you can use evaluation performance
  • The models demonstrate a noticeable return on investment
  • You can optimize your sales funnel drive efficiency over time

Propensity models are also scalable. They will adapt to large data sets, and they can process data in real time.

Valtim and Propensity Score Matching

Valtim can help your organization with propensity score matching. Whether you have experience with this method or you’re a first-time user, we can help guide you along the way. There are many ways to filter and monitor your propensity model, and we can show you the available options.

Once your model delivers the results you want, we can help you design a direct mail campaign that will achieve your goals. You can complete all these processes while helping your organization save money. Contact Valtim to hear how Propensity Model Scoring can help your organization build a better marketing strategy.

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