The Haves And Have-Nots Of Predictive Marketing

Predictive marketing — using information from customer data, like purchase history, to determine a pattern and predict future outcomes — was once only available to the largest retailers.

But now, thanks to new technology and industry innovation, predictive marketing is becoming more and more available to businesses of any size, which is why Windsor Circle recently compiled a survey of 256 small, medium and large-sized retailers to see exactly how they are using predictive marketing to currently aid their businesses and how they plan on using it in the future.

“Every retailer wishes for the crystal-ball ability to predict where the next purchase will come from,” according to Windsor Circle. “Technology has granted more retailers that power in recent years by enabling them to harness customer data and use it to build marketing campaigns with personalized messaging around their customers’ buying habits.”

Amazon, for example, claims that 35 percent of its revenue comes from the onsite recommendations it offers customers while they browse other items on its marketplace based on predictive data, while Netflix says that 75 percent of the programs subscribers watch come from product recommendations.

Windsor Circle said its survey indicates that more retailers of all sizes are incorporating predictive marketing strategies into their digital and omnichannel platforms, likely based on the success of the larger retailers who have been implementing it for years.

“It’s very clear from the results of this study that the rest of the market is starting to leverage technology platforms to go do the same thing,” according to Windsor Circle CEO and Cofounder Matt Williamson. “We’re starting to move out of the innovator and early adopter phases of the technology adoption curve, and now, we’re really starting to get into the mass market.”

Windsor Circle surveyed a mix of online, brick-and-mortar and wholesale businesses, broken down into 21 percent large businesses, 20 percent medium businesses and 59 percent small businesses.

Of all the businesses surveyed, however, 67 percent of them rated themselves as “mostly beginners” to predictive marketing, although almost one-half of all retailers surveyed are currently leveraging some form of predictive marketing to customers, while between 20 and 40 percent said they plan to implement some form of the practice over the next 12 months.

“There is a signal that there’s a war going on, and people are arming themselves with the new capabilities,” according to Williamson. “And then, those who don’t will get left behind.”

Of the 33 percent of small retailers who do not currently use predictive data in their advertising strategy, 77 percent of them were categorized as small businesses with less than $5 million in annual online revenue.

Although, even for the 66 percent of retailers currently using predictive marketing, a data gap does still clearly exist, according to Williamson. Only about 6 percent of businesses surveyed reported having the ability to integrate predictive, actionable data into their systems and platforms.

“That means that retailers are at a point where they’re starting to get the data, but because they don’t have a high degree of confidence in either the data or the predictions that go along with it, only a small percentage of retailers feel like they have a good handle on it,” according to Windsor Circle’s report.

Williamson said that about 70 percent of retailers are running new subscriber email campaigns, but only about 24 percent of all businesses surveyed were leveraging predictive order dates and dynamic product recommendations into their email campaigns.

“Everybody is moving toward automation,” according to Williamson. “The real competitive advantage, however, is people mingling predictive data into it.”

Overall, 65 percent of retailers are running new customer welcome series — that number jumps to 98 percent when large retailers alone are studied — but only about 19 percent of them are using predictive data in those campaigns.

Windsor Circle also found that 53 percent of retailers reported they don’t leverage product recommendation campaigns (although 60 percent of them intend to start one over the next year).

And of the 47 percent of retailers running automated product recommendation campaigns, 70 percent are not using dynamic recommendations.

“Retailers who are incorporating predictive marketing are anticipating higher sales and retention from their efforts,” according to Windsor Circle. “Among retailers polled, 37 percent said their top desired outcomes were increased sales and conversions, followed closely by increased retention, lifetime value and engagement, with 19 percent of retailers saying
this is a key goal.”

Long story short, Windsor Circle believes that any retailer looking to increase their conversions should explore predictive marketing options.