How to use predictive analytics in data-driven marketing
“Predictive analytics is like a crystal ball, giving you the ability to look into the future and see what your customers will do before they do it.” – Eric Siegel, Ph.D. (Founder of the Predictive Analytics World and Deep Learning World conference series)
Marketing is not just about creating a buzz around your product or service; it’s also about making informed decisions based on the data you collect from your customers. Predictive analytics is a powerful tool that can help businesses make data-driven decisions to stay ahead of their competitors.
Let's say you're a marketer for an online store selling clothes. You want to boost your sales and attract more customers to your site. You're currently running ads on social media and search engines, but you're not getting the results you were hoping for. You're not sure what to do next, and you're starting to feel frustrated. This is where predictive analytics can help.
According to Grand View Research, the global market size for the predictive analytics market was USD 5.7 Billion in 2018. It was expected to grow by a CAGR of 23.2% over the next 5 years.
So what is Predictive Analytics? Predictive analytics is a field of data analysis that involves utilising machine learning algorithms to examine past data and anticipate future occurrences. In the realm of marketing, it can aid in identifying customer behavior trends, forecasting demand, and predicting future patterns. By analysing data and gaining insights into customer behaviour, marketers can optimise their campaigns to achieve better results and higher ROI. By using this method, marketers can make well-informed decisions instead of relying on intuition or speculation. Additionally, data-driven marketing strategies using predictive analytics enable marketers to measure and track the effectiveness of their campaigns, identify areas for improvement, and continually refine their approach. The result is a more efficient, effective, and targeted marketing strategy that leads to increased revenue and customer satisfaction.
How Predictive Analytics is Used in Data-Driven Marketing
The utilisation of predictive analytics can aid businesses in dividing their customers into groups based on their behaviors, preferences, and demographics. By dividing customers into segments, companies can create personalised marketing campaigns that are more likely to connect with their customers. As an illustration, Netflix uses predictive analytics to categorize its subscribers according to their viewing history and preferences. This enables them to recommend personalised content to their customers, which increases customer engagement and retention.
Customer Lifetime Value (CLV)
CLV is the total value a customer is expected to bring to a business over their lifetime. Predictive analytics can help businesses estimate CLV by analysing customer data, such as purchase history, frequency, and amount spent. By estimating the CLV of its customers, e-commerce giants like Amazon can identify their most valuable customers and create personalised offers and promotions to keep them engaged.
Creating targeted marketing campaigns
By utilising predictive analytics, businesses can determine which customers are most likely to react to a specific message or offer, and this can assist in the development of targeted marketing campaigns. By analysing past behaviour and demographic data, businesses can create customer segments and tailor their messaging to each group. For example, a car dealership can use predictive analytics to identify customers who are most likely to be in the market for a new car and target them with personalised ads or promotions.
Churn refers to the number of customers who stop using a product or service. Predictive analytics is a good tool to predict churn by analysing customer behaviour patterns and identifying those who are likely to leave which then helps marketers create offers and promotions to retail the customers or users.
Forecasting customer demand
Predictive analytics can be utlised to forecast customer demand. By analysing sales data, businesses can identify trends and predict future demand for their products or services. This can help businesses optimise their inventory management and ensure they have enough stock to meet customer demand. For example, a restaurant can use predictive analytics to forecast demand for certain dishes and ensure they have enough ingredients on hand to meet that demand.
Predictive Analytics Measurement Models
One of the essential aspects of implementing a predictive analytics strategy in marketing is measuring its effectiveness. According to Hevo Data, popular measurement models include lift analysis, response modelling, and churn modelling. The lift analysis model helps measure the effectiveness of a marketing campaign by comparing the response rate of a target group with the response rate of a control group. The response modelling model predicts the likelihood of a customer taking a specific action based on their behaviour and characteristics. Lastly, the churn modelling model predicts the likelihood of a customer leaving a business or discontinuing a service. By utilising these predictive analytics measurement models, marketers can evaluate the effectiveness of their campaigns, identify areas for improvement, and make data-driven decisions that lead to increased ROI.
Choosing the right predictive analytics tool
There are many predictive analytics tools available on the market, each with its own strengths and weaknesses. When choosing a predictive analytics tool for data-driven marketing, businesses should consider factors such as ease of use, scalability, and integration with existing systems. The Live Enterprise suite is one such tool.*
Challenges with predictive analytics
While predictive analytics can bring many benefits to businesses, there are also some challenges to consider. One of the biggest challenges is the quality of the data being analysed. Predictive analytics is only as good as the data it is based on, so businesses need to ensure they have accurate and reliable data before making decisions based on predictive analytics. Another challenge is the complexity of predictive analytics models, which can be difficult to interpret and understand for non-technical users.
Predictive analytics is a powerful tool that can help businesses make informed decisions and stay ahead of their competitors. By using predictive analytics in data-driven marketing, businesses can identify customer behaviour patterns, predict future trends, and forecast customer demand. This enables them to create targeted marketing campaigns, increase customer engagement and retention, and optimise inventory management. If you want to take your marketing efforts to the next level, consider incorporating predictive analytics into your strategy. By doing so, you'll be able to unlock valuable insights and gain a competitive advantage in your industry.
*For organizations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organizational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organizations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organizations that are innovating collaboratively for the future.