Example: Using the Profit Simulation

This example of a Profit Simulation is based on one specific threshold and associated with a specific percentage of the population, a specific percentage of attained positive target and a specific cost.

Associate a cost/profit
Example
As an example to understand how the profit simulation works, we will consider the same example as for the error matrix.
In our Confusion Matrix example (see the relevant-related link for more information), we have decided on the following threshold:
  • Contacted population (see 1 on the graphic below): 24.1% of the population.
  • Detected target (see 2): 68.4% of the actual positive cases.

The marketing department has estimated that the cost per contacted customers is 2€ and that the profit per customers that will really answer positively is 20€ (see 3).

The total profit matrix is updated accordingly and displays the following results:

You obtain an estimation of the gap between the profit of the action based on a random selection (without any predictive model): 8, 314€ (see 4) and the profit based on this selection: 34,634€ (see 5).

Using the Maximize Profit
Example
If with those unit cost/profit (see 1 on the graphic below), you select the option Maximize Profit, the matrix is updated as follow:

To maximize your profit, the application recommends to target 50.5% of the population, not 24.1% (see 2). This would represent 95.3% of the detected target (see 3). Using this proposed threshold, the profit will be 44,114€ (see 4).