Classification Profits and ROI

For classification trees, gains statistics can also be displayed in terms of profit and ROI (return on investment). The Define Profits dialog box enables you to specify revenue and expenses for each category.

1. On the Gains tab, click the Profit button (labeled $/$) on the toolbar to access the dialog box.
2. Enter revenue and expense values for each category of the target field.

For example, if it costs you $0.48 to mail an offer to each customer and the revenue from a positive response is $9.95 for a three-month subscription, then each no response costs you $0.48 and each yes earns you $9.47 (calculated as 9.95–0.48).

In the gains table, profit is calculated as the sum of revenues minus expenditures for each of the records at a terminal node. ROI is total profit divided by total expenditure at a node.

Comments

• Profit values affect only average profit and ROI values displayed in the gains table, as a way of viewing statistics in terms more applicable to your bottom line. They do not affect the basic tree model structure. Profits should not be confused with misclassification costs, which are specified in the tree-building node and are factored into the model as a way of protecting against costly mistakes.
• Profit specifications are not persisted between one interactive tree-building session and the next.