The crystal ball—oft spoken of in folkloric terms, but never available when you need it—has entered the realm of the possible. In our switched-on world, where digital interaction is present virtually every moment of an individual’s life, we as marketers now have the tools to peer into the future—using data, and not crystalline, to gaze forward at where our business is going.
Predictive analytics—the process of using new and historical data to foresee the result, activity, behavior, and trends of our consumer base—is the key that is making successful businesses, well, successful. Enterprises primed for growth in today’s hyper-competitive marketplace are using predictive analytics to gain a deep understanding of the customer base to maximize revenue, efficacy of marketing budgets, and, of course, profits.
So how can you unlock the benefits of predictive analytics for your business? Let’s look at some of the key predictive tools and how they can be deployed to help your business.
With the deliberate use of these predictive analytics tools (and others), a business can then predict the Customer Lifetime Value (CLV). This measurement looks at several aspects of historical behavior to identify:
This model then adds an estimate of expected retention to the equation as a means of estimating future value. Once you understand the CLV, you can right-size the cost of acquisition and your marketing budget to reach the desired ROI.
One last note: When applying predictive analytics, it’s absolutely critical to A/B test your approaches to inform your output. Known as casual inference, A/B testing of the same target audience allows us to infer the WHY behind the WHAT customers are doing.
With these steps and measurements in place, you have earned your role as fortune teller – overseeing a true Predictive Analytics Organization. This is a tight ship, where marketing, sales, operations and finance work hand in hand, constantly providing feedback into the “data-outcome-analysis” loop.
Remember, it all starts with the clear articulation of the business strategy. With all parties in alignment, the chips should fall in place:
If you’re not predicting, you’re losing ground. Need help gazing into your own company’s crystal ball? Please give me a call.