What is predictive marketing and how does it work?

Predictive marketing enables brands to anticipate their audience’s desires and hone in on their most valuable customers in order to accelerate them through the buyer’s journey and ultimately drive more predictable revenue.

What is predictive marketing and how does it work?

From conversational marketing to neuromarketing to guerilla marketing, you can throw almost any word in front of “marketing” these days and uncover a new subspecialty that some brand is probably already using to make millions. “Predictive marketing” might sound just as niche, but there’s no reason for it to be written off as a fad or a buzzword. In fact, it’s about as data-driven as marketing can get.

Predictive marketing is the practice of using data to understand consumer behavior, forecast likely outcomes, and make more effective marketing decisions. Picture being able to predict the results of your strategic decisions—you’d instantly know which ones would produce the most bang for your buck.

The key to understanding predictive marketing is to recognize that it’s all about what you do with your data. Predictions aren’t the most important part of predictive marketing—making them actionable is.

How does predictive marketing work?

It all starts with data. Brands already collect significant amounts of data about their customers for a variety of purposes, but for predictive marketing to truly work, first-party data alone doesn't cut it. After all, the more you know about what a customer does today, the better you’ll be able to anticipate what they do next.

Since cookies are on the way out, brands these days need creative new ways to enrich their first-party data while still respecting their customers' privacy. Increasingly, this means investing in enhanced consumer data from responsible sources, collected without any cookies whatsoever. Once they do that, they're able to build out rich customer profiles based on detailed financial, demographic, and lifestyle attributes and gain a wealth of insights into their customers.

At this stage, machine learning algorithms come into play. Brands can use these algorithms to parse through all their data and make predictions based on their unique business goals. For instance, they might want to know who in the country is most likely to become a lead, or whether an existing customer is forecasted to have a high lifetime value. Algorithms can determine that by uncovering patterns in the data that it would take years for a person to figure out on their own.

Once brands have predictions in hand, putting them into action is key. They might predict which audiences are worth targeting so that they can build personalized campaigns for those unique individuals. Or they might predict which action is likely to help leads move down the funnel so that they know exactly which strategy to prioritize. They can even predict which customers are at risk of churn, and leverage real-time notifications to trigger engagement campaigns. The sky is the limit at this point.

Why is predictive marketing valuable?

In a competitive, fast-paced business world, brands need to know what behaviors consumers are likely to take so that they can deliver highly personalized experiences that align with people’s real needs. Predictive marketing enables brands to anticipate their audience’s desires and hone in on their most valuable customers in order to accelerate them through the buyer’s journey and ultimately drive more predictable revenue.

What does more predictable revenue look like? It could involve predicting good fit customers based on the characteristics that define your existing loyal customers, and focusing your next Facebook campaign on that audience in order to lower CAC. Or it could mean predicting which of your existing customers are most likely to purchase a specific product and doubling down on promoting it to them, generating millions in new sales rather than wasting marketing dollars on people who probably won’t buy it anyway.

Predictive marketing allows you to be far more clinical about which audiences you focus your time and budget on, not to mention how and where you market to them. It’s the definition of working smarter, not harder.

Benefits of using predictive marketing software

Since predictive marketing leverages artificial intelligence and machine learning algorithms, most brands need to use predictive marketing software to get the job done. Some companies with robust data science teams, ample resources, and plenty of room in their product roadmap might consider building out their own predictive marketing capabilities. However, accessing it through a vendor costs eight times less than it would to build it yourself, and allows you to get predictions up and running in just ten percent of the time.

Quick access to actionable predictions is one huge benefit of predictive marketing software—we’re talking weeks, not months or years. The quicker you can implement predictive marketing, the quicker you can start moving the needle on revenue and pulling ahead of your competition.

Ease of use is another reason so many brands buy predictive marketing software. Marketers can then build their own predictive models in just a couple clicks, no data science degree required, and seamlessly deploy predictions to their CRM, data warehouse, or wherever else they’d like. Plus, so many out-of-the-box options already exist—whether you’re interested in lead scoring or propensity models or churn prediction, there’s a turnkey solution already waiting for you.

Get predictive with Faraday

While we wouldn’t say we invented predictive marketing, we’ve been in the business for ten years—way before it was cool. We’ve helped hundreds of brands make trillions of predictions, supporting them every step of the way from data enhancement to model deployment. If you’re looking to better understand and predict consumer behavior so that you can make smarter marketing decisions, you’re in the right place.

Browse a full list of predictive marketing solutions