Using Past Responders to Target Non-Responders

Abstract

Firms must often decide how to target households that did not respond to past promotions. For example, when prospecting for new customers, households that purchase are no longer eligible, and so the remaining households are an increasingly pure pool of non-responders. Past response data reflects the behavior of households that responded, and these households generally differ from the rest in unobservable ways. We show that despite this, the decisions of the past responders in a group can help firms target the remaining non-responders. In particular, the timing of past responses can help to reveal whether a geographic region is (a) exhausted of future responders, or (b) the future responders just require additional exposures. We use this insight to develop three different timing measures. The measures are calculated and validated using a sequence of mailings in a large-scale field experiment. The measures perform well, even when some regions have only a handful of past responses to calibrate them. They confirm that the decisions of past responders can help firms target non-responders.