You may have heard of Nostradamus, a famous French physician, astrologer and seer of the 16th century. He’s famous for his book, Les Prophéties, 942 verses that claim to predict future events. They’re highly symbolic and entirely open to interpretation. Many believe that the prophecies have accurately predicted various historical events, while skeptics say that the verses are so vague that they can be interpreted to suit real events. In short, they’re more poetry than prophecy.
When you’re running an eCommerce business, you need accuracy and specificity, not metaphors and poetry! That’s where predictive analytics comes in.
An introduction to predictive analytics
You already have data on customer behavior, sales, engagement and more. Using these historical data patterns, with statistical algorithms, artificial intelligence and machine learning, you can predict the likelihood of future outcomes. That’s predictive analytics in a nutshell.
Here’s how predictive analytics works:
Data Collection from sources like databases, historical records, customer interactions, sensors, social media, and more
Data Preprocessing to handle missing values, remove outliers, and transform data into a suitable format
Feature Selection to choose only relevant variables from the dataset, reducing complexity and improving accuracy
Model Building through statistical algorithms, machine learning techniques, or deep learning methods
Model Training using historical data
Validation and Testing of the model on a new dataset
Deployment on live data to make predictions based on learned patterns
Predictive analytics is widely used in various industries, including finance, marketing, manufacturing, and retail. It helps you make informed decisions, reduce risks, improve operational efficiency, and enhance overall business strategies.
How does predictive analytics help improve customer experience?
It helps you improve the planning of different aspects of the business. For instance, how much inventory should you stock? When do you need ten customer care employees in the store, and when will four do? Should your sale banner fill the screen or should you include multiple product links above the fold? With the right data and algorithms, companies can depend on predictive analytics to make informed decisions that positively impact customer engagement, in-store or on-site satisfaction, and loyalty.
Here’s some ways that predictive analytics helps you improve customer experience in different areas.
Once you’ve performed predictive customer segmentation, you learn individual customer interests for each segment. Based on this information, you can create personalized marketing campaigns – such as tailored product recommendations, offers, and targeted advertisements, designed based on insights gathered from predictive analysis. Such precise targeting can significantly improve customer engagement.
With the right analytics, you can optimize the supply chain and ensure that there’s always just the right amount of stock available in your warehouses. This can be done through more accurate product demand forecasting, as well as by identifying potential disruptions in the supply chain. By analyzing historical sales data, market trends, and other internal and external factors, you can minimize delay, reduce lead times and ensure product availability when customers want to buy them – thus increasing customer satisfaction.
Anticipatory Customer Service
Predictive analytics can analyze your support and maintenance data to project when customers are likely to face problems of different kinds. This gives your business the opportunity to reach out to customers proactively, even before they face an issue or have occasion to complain.
When is a customer likely to go dormant or move on? Predictive analytics can identify signs that such customer churn is imminent, based on usage patterns, customer interactions, and customer feedback. You can proactively reach out to such at-risk customers to improve loyalty and retain them in the long run.
Using a predictive analytics model that studies demand, competitor pricing, and customer interest, among other parameters, you can devise a dynamic pricing model that increase profitability and maintain demand with dynamic pricing. Since prices could rise or fall based on the various data points, this pricing strategy improves value for money as well.
By analyzing customer data and behavior, predictive analytics can help you customize your products or services to suit each customer group. This could include special bundles, packaging, different SKUs, or service contract options.
User Experience Optimization
Customers interact with your website, web app or mobile app, giving you a wide range of data points. These can be analyzed to understand page load speeds, how customers navigate these platforms, which pages suffer from a high bounce rate, and other parameters. These insights help you determine where there’s scope for improvement in UI/UX optimization.
Cross-Selling and Upselling
When you have a happy customer, you want to boost their lifetime value by cross-selling and upselling! With predictive analytics, you can strike when the iron is hot and offer relevant products or services precisely when customers are most likely to buy. While this naturally boosts sales, it also improves the relevance of the products offered to the customer, improving the overall customer experience.
Customer Journey Optimization
Where do your customers drop off? By mapping customer journeys based on historical data, predictive analytics can identify bottlenecks or friction points based on which you can optimize the customer experience and create a seamless customer journey.
Subscription Renewal Predictions
For subscription-based services, predictive analytics can forecast which customers will renew or cancel their subscriptions. Once you’ve identified at-risk customers, you can reach out to them proactively with targeted offers and better customer retention strategies.
By incorporating predictive analytics into customer experience strategies, you can move beyond reactive sales approaches and make proactive, data-driven decisions to meet customer needs and fill identified gaps. You’re empowered to anticipate customer requirements, and can thus create a seamless, personalized, and delightful customer experience, fostering loyalty and long-term relationships.
How do you incorporate predictive analytics and data-driven decision making to optimize your eCommerce customer experience? Ask our experts for a consultation today.