What Is Predictive Marketing? (And Why Does It Matter Now?)

What is Predictive Marketing

Predictive marketing is a powerful strategy that uses data analysis to forecast consumer behavior and optimize marketing efforts.

If you’ve stumbled upon this article, then you’re curious about what the heck predictive marketing is and why it’s useful. The truth is that numerous industries already use this marketing approach — and with success. According to a recent study about predictive marketing, 47 percent of organizations are currently aware of predictive marketing and are seeing how they can use it, and 25 percent of organizations say that they are already using some predictive tools.

Ready to learn more about predictive marketing and how it can benefit your company? Keep reading!

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What is predictive marketing?

Predictive marketing is the idea of taking existing and relevant data and using it to make smarter marketing decisions. Predictive marketing allows you to make decisions that are more likely to succeed, and less likely to fail.

Imagine being able to know if your marketing campaign has a higher chance of success, based on existing data. Rather than depending on hunches or theories, you have a concrete idea which strategies will work.

How does predictive marketing work?

Now you know predictive marketing’s definition, but how does it work? Predictive marketing works by collecting data from a growing list of sources, consolidating that data, and combining it with your marketing or customer data.

You can use that data to build a predictive model, which you customize to your business. Companies rely on a specific type of technology for predictive marketing. While complicated to use, depending on your background and experience, businesses often resolve the learning curve of predictive marketing technology by partnering with a third-party vendor.

This vendor takes care of the technical work, allowing your team to access data insights with ease. Your company can then apply those data-driven insights to your marketing strategy.

Predictive marketing challenges

Despite the many benefits of predictive marketing technology, there are some challenges with it:

You need to assess the data

While predictive marketing analyzes all your data, it’s up to your team to evaluate those summaries. For example, an application may provide a quick summary of lead generation rates for your content.

Based on that initial analysis, your team may see that how-to blog posts consistently deliver high-quality leads. It’s up to your team to discover that correlation, as well as plan your next move.

You need to have marketing expertise

It’s critical to mention that predictive marketing is not a substitute for your team. You should think of predictive technology as a consultant.

It’s also important to recognize that this software provides a data-backed prediction — not a data-backed confirmation of what digital marketing strategies will perform. While one tactic may have a history of stellar performance, it may underdeliver in the future due to unforeseen circumstances, like economic conditions, new regulations, and more. That’s why your team needs to assess the data, plus use what you know when strategizing.

These predictive marketing challenges aren’t a reason to change your mind about predictive marketing. Instead, they’re essential pieces of information. Any company that’s considering predictive marketing should know and understand these challenges.

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Why does predictive marketing matter to businesses?

Having an accurate prediction for the outcome of anything, from weather conditions to marketing campaigns, is invaluable.

With effective predictive marketing, you have additional insight into what will happen, based on your strategy, spend, target audience, and more. Four additional benefits of predictive marketing include:

1. Improved customer engagement and loyalty

You learn more about your customers through predictive marketing because you have access to relevant data that applies to them. This feature helps you engage your target market better because you have extra insight into their likes, dislikes, pain points, and responses to different marketing tactics. Predictive marketing can also increase consumer loyalty.

Based on your consumer data, you could create targeted email campaigns based on recent purchases by consumers, for example. In short, this strategy can get you some repeat purchases and increase brand loyalty with your customers.

2. Increased revenue

By adopting predictive marketing, you can improve your profits. In comparison to competitors, your company’s making data-driven decisions. You aren’t assuming or depending on hunches on whether a piece of content, like a how-to blog post, will perform with your target market.

Based on your data, you know how most readers will respond. With predictive marketing, you can also determine which segments of your target audience offer the most value. This information allows your company to focus on the most valuable customers, which can help you maximize the average lifetime value of a client, as well as your revenue.

3. Enhanced customer targeting

Through predictive marketing, you can learn a lot about your target marketing, including:

• What they need
• What they want
• How they shop
• Where they look for purchase advice
• And more!

As people are more likely to respond to messages personalized to them, you can use predictive marketing to create a customized experience for everyone in your target audience. Personalized marketing also helps with brand loyalty, brand awareness, and customer experience. Predictive marketing can provide valuable information about your shopper’s journey.

Isn’t that the buying or sales funnel, though? Well, not quite. Google has analyzed years of data and determined that the traditional buying funnel is not quite so linear anymore.

In fact, it’s more abstract than ever. With predictive marketing, however, you can analyze the path your consumers take and target users in different parts of their unique buying cycle. Ultimately, this allows you to reach your target consumers more effectively.

4. Optimized marketing budgets

Predictive marketing can help your team learn which marketing channels work best. For example, say your business currently invests in digital marketing, print advertising, and television advertising. Once you start using predictive marketing, however, you learn that traditional channels, like print and TV, don’t help you as much as digital.

Thanks to this insight, you decide to ditch print and TV and invest it into digital.

Examples of predictive marketing

Early adopters of predictive marketing include many well-known brands, from Amazon to Facebook to Netflix. Their investment in predictive marketing has helped these businesses grow their brand and business, resulting in more market share and revenue. Take a look at how predictive marketing helped Netflix and Amazon:

Netflix

If you use Netflix, then you know it gives you suggestions based on what genres, shows, or movies you watch on the platform.

These suggestions are a prime example of predictive marketing and are essential to Netflix’s business model. The more relevant recommendations they give you, the more you use their platform, and the more you use their platform, the longer you stay subscribed to it. Plus, the accuracy of Netflix’s recommendations can encourage you to share your positive and personalized experience with your network.

Predictive marketing has been a fundamental part of Netflix for a while now. Way back in 2009, Netflix offered $1 million to anyone that could improve their recommendation algorithm. Netflix awarded this prize to a team that grew the algorithm’s accuracy by about 10 percent.

Amazon

Amazon also uses predictive marketing to increase purchase rates.

Amazon provides shoppers with product recommendations based on:

• What a shopper has bought in the past
• What other shoppers have bought when viewing the same product
• What shoppers bought after purchasing a product

These recommendations make a massive difference for Amazon and drive 30 percent of their revenue, which is substantial as the company made almost $514 billion in 2022. Whether you’re a brick-and-mortar or ecommerce company, you can use predictive marketing.

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