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Core Concepts of Predictive Marketing: The Power of Customer Equity

How predictive marketing helps companies evolve to a customer-centric model and earn customer equity and lifetime value.

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measure customer equity

We believe that anyone can learn to do predictive marketing with the right foundation. In our series, “Core Concepts of Predictive Marketing”, Acquia’s Chief Science Officer, Omer Artun shares excerpts from his book: “Predictive Marketing: Easy Ways Every Marketer Can Use Customer Analytics and Big Data.” 

This series will be a guide to everything you need to know about relationship marketing and predictive analytics in marketing. Dive in to learn how to activate your customer data and tap into unlimited opportunity.    

Predictive marketing gives rise to a new, data-driven way to approach marketing, with the customer at its center. The ability to collect and analyze data on every single customer, as well as his or her interactions with your brand, allows you to serve your customers better and generate more sales. At its core, as Figure 1 illustrates, predictive marketing is helping companies to evolve from a product- or channel-centric orientation to a customer-centric orientation. 

Figure 1: From a Product to a Customer Orientation

Companies using predictive marketing focus on developing and managing customer relationships rather than just developing and selling products or channels:

  • Instead of finding customers who will want your products, it is now possible to discover which products your customers will want in the future.
  • Instead of maximizing sales, companies in the customer era focus on optimizing customer lifetime value and share of wallet to drive profitability of the enterprise.
  • Instead of organizing around channels and product lines, companies which practice predictive marketing organize around the customer.
  • With the customer at the center, companies are using big data and predictive analytics to configure processes and organizations to find ways to customize interactions.
  • Communications become much more targeted and the key metric is relevance not reach.

 

Predictive marketing allows you to identify and realize the long-term value of customer relations to keep your best customers coming back and buying more. Figure 2 illustrates the core principle: if your company acquires more profitable customers, grows the value of each and every customer systematically and retains these customer relationships for a long time, the firm will grow, too.

Figure 2: Customers Are Key to Market Value 

Companies should think about managing customer equity in much the same way they manage their stock portfolios: just like stocks, some customers are more valuable than others and their value will rise and fall throughout time. Predictive marketing gives companies an easy and automated way to manage individual customer lifetime value and customer equity.

The key to unlocking this value lies in the information you are able to collect about your customers. The more you can personalize the experiences you offer, the more likely the customer remains loyal to your brand. Think about your hairdresser. She has a lot of information about you. She knows how you like your haircut and probably knows a lot about your family, friends, and job. This information makes the inter- action with your hairdresser very seamless. You sit down, she gets to work and you have a pleasant conversation. She may call you when it’s time for your next appointment and suggest a new hairstyle from time to time. It would take you a long time to start over with a new hairdresser. Your hairdresser has very few clients. Most marketers serve millions of customers. It is not possible for a brand to collect and process the data of millions of customers without computers and software.

Predictive marketing puts customer data and insights directly in the hands of marketers, customer-facing personnel, and applications that deliver personalized experiences to individual customers.

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In our next post, we’ll look deeper at the predictive analytics process in action. 

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