Advanced Marketing Research

Group Report
SS 15
Bank Marketing

Vanessa Hofsttter
Patricia Mller
Konstantin Kremslehner
Sina Israel

Table of Content

Abstract
Direct Marketing is the practice of delivering promotional messages
directly to customers or prospects on an individual basis rather than using
a mass medium (Mandapaka et al., 2014). This paper suggests a binary
response model that helps a Portuguese financial service institute
targeting high quality receptive customers for their future campaigns and
identifies the important factors that influence the marketing campaigns
success to effectively manage resources. The research is based on a real
world sample data set from a Portuguese banking institute conducting a
direct telephone campaign (4,521 cases and 16 variables) containing past
campaign information (e.g. previous campaign outcome, duration of call or
customers personal and banking information). To predict the binary
customer responses to subscribe for a term deposit after being contacted
by a sales representative via telephone, a Logistic Regression Model was
built. The analysis showed that customers are more likely to subscribe for
a term deposit when they are well-educated, perform a rather risk-averse
job and are either single or divorced.

Introduction
Banks and other financial institutes operate in a highly competitive and
saturated market that is still lacking trust from both customer and inter
bank perspective after the global financial crisis in 2008. Especially the
Portuguese banking system was hit severely which contributed to the
European economic slowdown.
Due to a relative low interest rate for term deposits 1, banks are facing the
challenge to acquire customers who store their money for a fixed period of
time at the bank, which is a cost-efficient refinancing instrument for the
bank. Due to this present market condition, it is of utmost importance for
marketers to use a sophisticated Customer Relationship Management tool
1

A term deposit held at a financial institution has a fixed term. These are generally short-term
with maturities ranging anywhere from a month a few years. When a term deposit is purchased, the
lender (the customer) understands that the money can only be withdrawn after the term as ended
or by giving a predetermined number of days notice. (source: investopia.com)

to make the most of customer contact information. Thus, to conduct an

effective and efficient marketing campaign for the subscription of term
deposits at the case at hand, the existing customer database needs to be
refined in order to extract target customers that are at least interested in
or preferably respond positively to the promotion. The goal is to develop a
binary response model that enables the Portuguese bank to predict the
outcome (yes= subscription, no= no subscription) to efficiently invest in
direct marketing campaigns with a targeted selection of customers.
Statistical modeling is a data-based science that uses patterns in observed
variables to provide an overall mathematical structure to real-world
happenings (Sulock 2009). This paper will use a specific generalized linear
model, logistic regression, to make predictions concerning the likelihood of
subscribing for a term deposit. First, an overview of the data set will be
provided, followed by a brief introduction of the applied statistical model.
In the next step, the analysis and interpretation of the data is conducted,
which is the foundation for managerial implications. Last but not least, the
limitations of the model will be discussed.
Data Description
The real world sample at hand consists of 4,521 observations and reflects
approximately 20% of the whole dataset. Every observation is an existing
customer of the Portuguese bank. For the analysis, 38 cases with an
unknown job have been removed from the data set as they lacked
explanatory power. The 16 predictor variables consisted of factors (e.g.
job, material status, education) and covariates (e.g. age, balance,
duration). The following table shows describes those variables:
Original
Variable
Age

Description

Job

Job description

Age of the consumer

Range of
Values
19-87
administrative
blue-collar
entrepreneur
housemaid
management

Type of
Information
Personal
Personal

retired
self employed

Marital Status

Education

Default
Balance
Housing
Loan
Contact

services
student
technican
unemployed
unknown
Marital Status of the
Divorced
consumer
Single
Married
Education of the consumer Primary
Secondary
Tertiary
Unknown
Indicates whether the
yes - no
client has a credit default
Account Balance
(-)3313 71188
Indicates whether the
yes - no
client has a housing loan
Indicates whether the
yes - no
client has a personal loan
Type of contact
cellular
communication
telephone
unknown

Day

Day last contact was made 1 - 31

Month

Month that last contact

was made
Duration of last contact in
seconds
Number of contacts
performed during this
campaign for the client,
including last contact
Number of days since the
client was last contacted in
a previous campaign
Number of contacts
performed before this
campaign for this client
Outcome of the previous
marketing campaign

Duration
Campaign

pdays

Previous

Outcome

Jan - Dec
4 - 3025
1 - 50

(-) 1 - 871

0 - 25

Success

Personal

Personal

Bank
Bank
Bank
Bank
Information of
current campaign
Information of
current campaign
Information of
current campaign
Information of
current campaign
Information of
current campaign
Information of
current campaign
Information of
current campaign
Information of
previous
campaign
Information of
previous
campaign
Information of
previous
campaign

Failure
Other
Unkown
To reflect the frequencies within the data set, relevant predictor variables
will be analyzed:
Job
21,4 % of the data set (969 cases) are working in management positions
and thereby constitute the biggest group within the data set. Blue-collar
worker account for 20,9 % of the data (946 cases) and technicians with
17% (768 cases) are the third biggest group in the data set. In contrast,
students, housemaids and unemployed account for the lowest proportion
of the sample.
job
Frequenc
y
Percent
Valid admin.
478
10,6
blue-collar
946
20,9
entrepreneur
168
3,7
housemaid
112
2,5
management
969
21,4
retired
230
5,1
self183
4,0
employed
services
417
9,2
student
84
1,9
technician
768
17,0
unemployed
128
2,8
unknown
38
,8
Total
4521
100,0
Education

Valid
Cumulative
Percent
Percent
10,6
10,6
20,9
31,5
3,7
35,2
2,5
37,7
21,4
59,1
5,1
64,2
4,0

68,3

9,2
1,9
17,0
2,8
,8
100,0

77,5
79,3
96,3
99,2
100,0

Regarding the level of education, it can be seen that more than half of the
data set consists of customers with a secondary education, followed by
tertiary (29,9 %) and primary education (15 %)

education
Frequenc
y
Percent

Valid
Percent

Cumulative
Percent

Valid primary
secondar
y
tertiary
unknown
Total

678

15,0

15,0

15,0

2306

51,0

51,0

66,0

1350
187
4521

29,9
4,1
100,0

29,9
4,1
100,0

95,9
100,0

Marital Status
Married customers account for the biggest proportion in the data set (61,9
%), followed by single (26,5 %) and divorced (11,7 %).

marital
Frequenc
y
Percent
Valid divorced
528
11,7
married
2797
61,9
single
1196
26,5
Total
4521
100,0

Valid
Cumulative
Percent
Percent
11,7
11,7
61,9
73,5
26,5
100,0
100,0

Housing and personal loan

From the first table, indicating how many customers of the data base have
already a housing loan from the bank, it can be seen that the majority
(56,6%) has a housing loan. In contrast, only 15,3 % of the customers
have a private loan with the bank (table 2).

housing

Valid no
yes
Total

Frequenc
y
Percent
1962
43,4
2559
56,6
4521
100,0

Valid
Cumulative
Percent
Percent
43,4
43,4
56,6
100,0
100,0

loan

Valid no
yes
Total

Frequenc
y
Percent
3830
84,7
691
15,3
4521
100,0

Valid
Cumulative
Percent
Percent
84,7
84,7
15,3
100,0
100,0

Generalized Linear Model

The model applied to predict the probability of the binary, dependent
outcome (yes and no regarding the subscription of the term deposit)
stems from the family of Generalized Linear Models. Here, a logistic
regression has been used as the predicted values can just be 0 or 1,
indicating the probability that success or failure occurs. Logistic regression
is an increasingly popular statistical technique that also provides insights
in to what attributes (i.e., variables) are more or less likely to predict event
outcome in a population of interest. These models also show the extent to
which changes in the values of the attributes may increase or decrease
the predicted probability of event outcome. The graph shows the different
shapes between a linear and logistic model. Since we are dealing with a
binary outcome, a S-shaped curve model is more suitable here.

Sources
Lilien, Gary L., Philip Kotler, and K. Sridhar. Moorthy. Marketing Models.
Englewood Cliffs, NJ: Prentice-Hall, 1992.
Mandapaka, A., Kushwah, A. Role of Customer Response Models in
Customer Solicitation Centers Direct Marketing Campaign, Chakraborty
Oklahoma State University, OK, USA, 2014
Sulock, M. Application of Binary Logistic Regression to College Admission
Data, 2009