How causal machine learning can leverage marketing strategies: Assessing and improving the performance of a coupon campaign

TL;DR

This paper demonstrates how causal machine learning can evaluate and optimize marketing strategies, specifically coupon campaigns, by analyzing their causal effects and heterogeneity across customer groups to improve sales outcomes.

Contribution

It introduces a causal machine learning approach to assess and optimize the effectiveness of marketing interventions, highlighting customer heterogeneity and data-driven targeting strategies.

Findings

Only two coupon categories significantly increased sales.

High prior purchase customers respond better to drugstore coupons.

Low prior purchase customers are more responsive to food coupons.

Abstract

We apply causal machine learning algorithms to assess the causal effect of a marketing intervention, namely a coupon campaign, on the sales of a retailer. Besides assessing the average impacts of different types of coupons, we also investigate the heterogeneity of causal effects across different subgroups of customers, e.g., between clients with relatively high vs. low prior purchases. Finally, we use optimal policy learning to determine (in a data-driven way) which customer groups should be targeted by the coupon campaign in order to maximize the marketing intervention's effectiveness in terms of sales. We find that only two out of the five coupon categories examined, namely coupons applicable to the product categories of drugstore items and other food, have a statistically significant positive effect on retailer sales. The assessment of group average treatment effects reveals substantial differences in the impact of coupon provision across customer groups, particularly across customer groups as defined by prior purchases at the store, with drugstore coupons being particularly effective among customers with high prior purchases and other food coupons among customers with low prior purchases. Our study provides a use case for the application of causal machine learning in business analytics to evaluate the causal impact of specific firm policies (like marketing campaigns) for decision support.