Do you want to better target your marketing offers to potential customers using predictive modeling? Chapter 4 of Kaiser Fung’s book Numbersense: How to Use Big Data to Your Advantage discusses some of the modeling challenges faced by Groupon, the daily deals company.
Fung explores what constitutes success in targeting customers and explains the law of diminishing returns in email marketing. "The trick of sending more emails is a double-edged sword. While the number of false-negative errors falls, the algorithm suffers from more false alarms," Fung writes in this chapter.
Fung says "a win for the modelers is a loss for the sales force" and shows how Groupon’s self-interest in maximizing its own revenues can be at odds with merchants’ own desires to profit.