A Two-stage screening procedure for mailing credit assessment

Direct mailing is one of the tools of business marketing. Itcan stimulate the purchase of mail-order products or financialservices. When selecting a mailing list, we hope to obtain ahigher mailing response; on the other hand, we also have toconsider the risk of defaulting. In the case of selling financialservices, customers who respond must be examined for credit.In order to avoid jeopardizing the existing relations with suchcustomers, companies try to reduce their rate of declining suchapplicants by controlling, at the mailing stage, for the riskof choosing customers who will default. In this article, a two-stage screening procedure is constructedto solve a problem of mailing credit assessment with mailingand credit-assessment stages;A screening method can be appliedto select a mailing list at the mailing stage, while the needfor a credit assessment depends on the types of product or service.Therefore, this problem may include four possible models: screeningwith or without credit assessment and random sampling with orwithout credit assessment. Moreover, the optimal cutoff scoresare determined by maximizing total profit. A mailing exampleis then given to illustrate the use of the proposed models formailing credit assessment. Compared with a random sampling method,a screening method has a significant improvement in terms ofresponse rate, decline rate, bad rate, and total profit.