Prediction in Marketing Using the Support Vector Machine

  • Authors:
  • Dapeng Cui;David Curry

  • Affiliations:
  • Ipsos Insight, North America, 111 North Canal, Suite 405, Chicago, Illinois 60606;College of Business Administration, University of Cincinnati, Cincinnati, Ohio 45221-0145

  • Venue:
  • Marketing Science
  • Year:
  • 2005

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Abstract

Many marketing problems require accurately predicting the outcome of a process or the future state of a system. In this paper, we investigate the ability of the support vector machine to predict outcomes in emerging environments in marketing, such as automated modeling, mass-produced models, intelligent software agents, and data mining. The support vector machine (SVM) is a semiparametric technique with origins in the machine-learning literature of computer science. Its approach to prediction differs markedly from that of standard parametric models. We explore these differences and benchmark the SVM's prediction hit-rates against those from the multinomial logit model. Because there are few applications of the SVM in marketing, we develop a framework to position it against current modeling techniques and to assess its weaknesses as well as its strengths.