What is Predictive Modeling?
The process that uses statistics and data to predict results with the help of data models is said to be predictive modeling. Predictive modeling is used to predict anything from advances in technology to corporate earning. Predictive modeling methods use data mining and advanced analytics that are likely to influence results in the future. Predictive modeling techniques employ a complex network or a simple linear equation to analyze the datasets and then such data is run through algorithms to determine what kind of products or services users might be interested in.
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What are the Different Predictive Modeling Techniques?
Technique 1: Behavioral Clustering
The path leading a prospective customer to convert into a buyer is incredibly valuable for a marketer who focuses on leveraging predictive modeling solutions. Behavioral clustering is one of the predictive modeling techniques that empowers marketing teams to determine trends and commonalities that help to create a new target segment. It can help marketers enhance conversions and predict the impact of marketing campaigns more precisely.
Technique 2: Product-Based Clusters
This is a predictive modeling technique that segments customers together based on similar engagement and activity with the brand. Product-based clusters focus specifically on tracking specific buying trends among target demographics. These product-based clusters also help in forecasting the lifetime value of a customer. Such predictive modeling techniques help companies in identifying services that they can actually sell to the customer over a period of time.
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Technique 3: Share of Wallet Estimation
“Share of wallet estimation” is a predictive modeling technique that assists companies to predict how much of their customer’s budget is with competitors. Also, it unveils what specific products or services you can sell to that particular customer in order to increase your share of wallet percentage. In order to attain the desired outcome, companies must leverage this technique along with the product-based clustering techniques.
Technique 4: Likelihood of Churn
Predictive analytics models are used by most of the marketers for lead generation. But this is a mistake because predictive modeling techniques have strong defensive capabilities that can help in measuring the likelihood of churn. For most companies, customer churn can be a big issue but predictive modeling techniques can help by measuring customer’s propensity to churn by analyzing their behavior. It can help in identifying “red flag” behaviors from previously churned customers and their troubling behavior. Such information can be followed up by the customer service teams and this can be further transitioned into a nurture campaign to reduce churn. The impact can be significant when it comes to retaining current customers and boosting revenue by minimizing churn.