It’s imperative to have a marketing strategy that forecasts future business prospects. Read this comprehensive guide to predictive analytics for marketing.
Over $100 billion is spent on big data and analytics annually, and the spending will continue to rise. Having access to the right information for analysis helps in many different areas of business which justifies spending.
Such developments as predictive analytics marketing are allowing businesses to see into the future seemingly.
If you could use a little insider information from the future, learning about predictive analytics tools is a must. Continue reading as we guide you through predictive marketing so you can understand how to implement it in your business.
The term Big Data was first used in 1997, but massive amounts of data were being stored long before this date. Without AI, it was difficult to make any sense of the data being stored, but with the latest develops, data is becoming even more invaluable to businesses.
Predictive analytics predicts future events or results. Various techniques such as data mining, modeling, statistics, machine learning and AI process and analyze data sets to develop predictions.
To put things simply, predictive analytics analyze patterns from historical and transactional data. This data is then processed further to identify future opportunities or potential risks. Properly identifying future opportunities and potential risk can gain and save your company thousands of dollars.
Here are the steps in the predictive analytics process:
- Defining outcomes
- Data collection
- Data analysis
- and model monitoring
Now that you have an idea of how predictive analytics works, how do you get started? Just knowing how something works isn’t going to give you the results you want.
As an entrepreneur or CEO, you need to first of all set a goal. Setting a goal will let you know if you’ve reached success with your marketing. If you don’t know your goals, you will be working aimlessly and see very little success.
You have a little idea of how to use this technology with the above information, but you can view here to get the details you need to get started.
If you still don’t get the full picture of why your business would need predictive analytics, here are some things you can do with predictive analytics.
Use predictive analytics to predict customer behavior and preferences. Amazon isn’t the only company that is going to be reading minds. Very soon even smaller companies will have access to this technology.
Complete catalog creation of predictive models can be an overwhelming task, but you can use simple model types that can apply to the marketing world.
Three primary classes of predictive models are as follows:
Segmentation is becoming more common, especially for email marketing. Numerous fields can be used to segment people from their demographics to the average order amount they make. Some other common customer segments are product and behavior segments.
Recommendations help your company recommend products and services to your customers. Sending advertisements that will be to their liking can be based on anything from past buying behavior or the fact that customers have shown interest in similar products.
To give you an example of how you might use this information:
Let’s say that you have a new line of cookware on the market. You’ve been bringing in a great deal of revenue and of course collecting data. You use the process to analyze the data, and you find that customers buying this cookware also wanted to buy another specific product.
The only problem was that while they wanted to buy this specific product, you didn’t have it in stock. Now that you have the information and you’ve predicted customers will buy a certain product along with the cookware, you know what product to order and have in stock for your clients.
We touched on targeted content distribution above, but the level at which you can target your customers can greatly increase conversion rates. If you can predict your customer is going to buy a car within the next 3-5 months and you sell cars, you can start seeding them with content. Since you’ve been seeding them with content, you are likely to be one of the companies they reach out to for help.
The more specific and helpful your communication is with your leads, the more likely they are to turn into clients. Use the information you’ve gained from predictive analytics to create campaigns for customer segments. The more specific the segment, the more effective the promotion.
Using predictive analytics for your marketing campaign will allow you to get a handle on measurements and metrics. When we refer to measurements and metrics, we aren’t talking about analytics like Google Analytics. We are talking about metrics that are used in calculating ROI and marketing performance.
Here are a few of the main metrics most often used for this purpose.
- Customer acquisition cost (CAC) which means the total sales and marketing cost divided by the number of new customers gained within a specific period.
- Marketing originated customer percentage is calculated by dividing the number of customers in a given month with the number of new customers.
- Time to earn back CAC should be calculated using analytics as well.
Having in-depth data and the ability to apply the knowledge you have enables you to market more effectively. More effective marketing campaigns mean you can reduce your CAC and increase your conversion rate. Increasing CAC will have a positive effect on the bottom line with increased profits.
As this technology becomes more widely available to even small businesses, you will encounter more specific advertisements, product suggestions, and personalized experiences. Not only is this new technology helpful to marketers but it helps the customer as well by giving them a great customer experience.
If you’re ready to increase your business knowledge beyond predictive analytics marketing, we have you covered. Check out our article about getting your small business organized today to keep your business on track.