Predictive analytics - taking data that exists from previous events and using it to determine what might happen next- is a critically valuable business tool.
Whether you are a believer in fortune-telling, or psychic readings, we’ve all had our future predicted – possibly as recently as today – through predictive analytics. Think about the last time you ordered an item online. Were you presented with a list of items other customers were interested in when they purchased the same thing you just bought?
That’s predictive analytics – taking data that exists from previous events and using it to determine what might happen next- and it’s a critically valuable business tool. Using what you know about your customers and comparing it to previous behaviors of customers with similar profiles allows you to adjust and optimize your customer retention programs to guide them along no matter where they are in your sales funnel.
First, of course, you have to gather demographic and psychographic information, and a robust customer loyalty program can do that for you. Your customers will happily offer up general information in exchange for points towards a reward, discounts or product. Information like location, age, household income, and attitudes and preferences can be extremely useful in predicting what others in similar demographics might do.
Specifically, predictive analytics maybe most useful in upselling- which is where online retailers like Amazon have the biggest impact in using this data. Amazon uses predictive analytics to create bundles of similar or related items (“customers like you also bought…”) or to provide “suggested purchases” for customers based on their audience with similar demographics, preferences and spending habits.
But that’s not all. Predictive analytics can also improve your customer’s experience with your company. Imagine how helpful you can be, how your level of service can increase, if you know what that customer is likely to do – or what they are likely to want – possibly even before they know. Knowing how they prefer to be contacted and when, and what types of promotions they will be interested in, amplifies your ability to reach them at their peak interest in what you have to offer.
You may even be able to predict when they are about to end their time with you and determine from past consumers what you might have to offer up to get them to stick around and extend their long-term value.
Treating your customers as individuals is key to meeting their needs, making them happy, and keeping them in your sales funnel. Perhaps, ironically, you can best meet their specific individual needs by studying the consumers you’ve interacted with before. Predictive analytics helps you reach – and retain – your current customers even before they know they need what you have to offer.