Class balancing in customer segments classification using support vector machine rule extraction and ensemble learning

An objective and data-based market segmentation is a precondition for efficient targeting in direct marketing campaigns. The role of customer segments classification in direct marketing is to predict the segment of most valuable customers who is likely to respond to a campaign based on previous purchasing behavior. A good-performing predictive model can significantly increase revenue, but also, reduce unnecessary marketing campaign costs. As this segment of customers is generally the smallest, most classification methods lead to misclassification of the minor class. To overcome this problem, this paper proposes a class balancing approach based on Support Vector Machine-Rule Extraction (SVM-RE) and ensemble learning. Additionally, this approach allows for rule extraction, which can describe and explain different customer segments. Using a customer base from a company?s direct marketing campaigns, the proposed approach is compared to other data balancing methods in terms of overall prediction accuracy, recall and precision for the minor class, as well as profitability of the campaign. It was found that the method performs better than other compared class balancing methods in terms of all mentioned criteria. Finally, the results confirm the superiority of the ensemble SVM method as a preprocessor, which effectively balances data in the process of customer segments classification.