Predicting the Future

Historically, business has done a much better job of reporting the past than predicting the future.

Annual reports summarize the past year. Typical business intelligence programs give you snapshots of the past month, quarter and beyond. These programs keep score – they digest and summarize what’s happened in the past.

Until recently, however, predicting what’s likely to happen in the future has been a mixture of black art and straight-line projections. Now, a combination of computer power and sophisticated mathematics has made it possible to predict the future with remarkable accuracy – the science of figuring out the future based on past events is called predictive analytics.

In the realm of customer behavior, the kinds of information most often requested are account-level predictions:

• Which customers are likely to buy again in the near future?
• What products or services are they likely to buy?
• Which customers are potential defectors?
• Which customers are good prospects to make an incremental purchase above their usual purchase rate?
• Which customers are good candidates to buy a type of product that they have not previously purchased?
• What is the lifetime value of a particular customer?

Customer satisfaction surveys, which are backwards-looking measures, can’t deliver this kind of information. Satisfaction is quick to grow and just as quick to disappear. It’s tied most closely to a customer’s last transaction or interaction. In contrast, customer loyalty is slow to grow and slow to fade away. Because loyalty analysis predicts future behavior, it can answer the questions above.

What would you like to know about your customers’ future behavior? How valuable would this kind of information be to your company? Contact Loyalty Builders and let us know.

For more detailed information, see the Loyalty Builders white paper on Purchase Probabilities.