Having addressed the need to consider individual preferences, we face the next hurdle in that a single consumer is still not of a consistent mindset when it comes to making a purchase. The marketing concept of a Funnel State captures how a consumer moves from unaware, to uninterested, to actively searching, to comparison shopping, and finally to conversion. Successful messaging to individual consumers must take into account the state of buyer readiness which, of course, is not directly observable. All marketing automation systems have this type of mechanism built in, but they depend on human judgment supported by manual scoring.
The branch of Machine Learning devoted to the detection of hidden states is called Hidden Markov Model (HMM). The accurate estimation of a consumer’s psychological state is a powerful way of determining the Next Best Action (NBA), where the seller offers the most optimal stimulus (ads, coupons, brochures, etc.) to reach a consumer based on their mental state in addition to the overall profile. In fact, the idea of taking proactive actions to affect the outcome moves the bar beyond Predictive Modeling to Prescriptive Modeling.
Advanced HMM involving this type of stimulus-driven state transition is called Non-Homogeneous HMM. This level of complexity seems foreboding, but is very much within the capability of the MCMC technique. The combination of HMM and HBM provides the ultimate Fine-Grained Personalization solution for Marketing efforts.