Saturday, August 1, 2009

Past and Current customer behavior are the best predictors of Future customer behavior

Past and Current customer behavior are the best predictors of Future customer behavior. Think about it. Any entity you can define as a
customer – external, internal, distributors, manufacturers, suppliers – they all pursue certain routines, and changes in these routines often indicate an opportunity or challenge is ahead in your relationship with them. When it comes to action-oriented activities like interacting with a web site, this concept really takes on a very important role. You can predict future behavior based on an understanding of past behavior, and use this knowledge to improve marketing or service programs.

Take these two groups of potential buyers who surf around the 'Net:
People who are a perfect demographic match for your business, but have never made a purchase / subscribed to a service online
People who are outside the core demographics for your business, but have repeatedly purchased / subscribed to a service online
If you sent a 20% off promotion to each group, asking them to visit and make a first purchase, response would be higher from the buyers (second bullet above) than the demographically targeted group (first bullet above).
It works because actual behavior is better at predicting future behavior than demographic characteristics are.