Predictive Analytics and Marketing
Predictive analytics has become one of the newest marketing buzzwords in 2016. However it’s more than the latest catch phrase. It’s the wave of the future in a myriad of disciplines. The use of predictive analytics in marketing and sales has become one of its most valuable business applications.
What is predictive analytics?
Many in the business world still don’t know what predictive analytics is or how it works and often fail to understand its full potential as a marketing model.
It the use of data, statistical algorithms and machine-learning to predict future outcomes. It is a multi-step process consisting of the following:
A key goal is to intelligently automate communications.
How Does Predictive Analytics Work?
Data is collected behaviors and actions of consumers and potential consumers from a from a variety of sources. This data is then combined with profile data about consumer characteristics.
The data is distilled and interpreted by sophisticated algorithms. Based on the analysis relevant communications and/or offers are made to likely consumers. Predictive analytics goes beyond descriptive statistics and reports on what happened in the past to provide a best assessment on what is likely to happen in the future. This streamlines decision-making and produces new insights that lead to better actions.
The ultimate goal is to apply mathematical models to predict the probability of an outcome.
The New Marketing Model
In a predictive analytics marketing model, relevant actions are carried out based on your collected and interpreted data. Predictions are made and the optimum marketing message is then delivered to current and potential customers via their most relevant and preferred marketing channel – and at the optimum time. The result is the improved likelihood of achieving higher engagement and greater sales.
As always, you decide what your marketing goals are and the predictive analytic algorithms determine the optimum way of achieving it. And with the advent of big data, you’ll be able to leverage even more diverse data and further optimize your marketing focus and spending.
Early surveys of companies using a predictive analytics model have shown great promise. They include:
– An in depth survey of 123 financial services companies by research firm the Aberdeen Group. They found that the companies utilizing a predictive analytics model achieved an 11 per cent increase in the number of clients over the previous 12 month period.
– A Forbes survey of 306 companies with $20 million or more in annual revenue found that those using predictive marketing initiatives for at least 2 years increased return on investment 86% as a result.
Looking to 2016 and Beyond
For 2016 and beyond, we’ll see the continued dramatic growth of predictive analytics marketing. As the design and price barrier lower, more small and medium sized businesses will enter the world of predictive analysis marketing.
Your competition has, or soon will have, predictive analytics models to attract, retain and grow the most profitable customers and maximize their marketing spending. If your marketing model does not yet include an anlytics model to forecast, determine customer responses, purchases and promote cross-sell opportunities, you’re in danger of falling behind.