Advertisers spend time and money on market research, attempting to target the most likely consumers – and retain current ones – with their advertising.
In truth, historically it has often come down to a guessing game.
Big Data has changed that, of course. With a growing amount of accurate data for consumer behavior online, companies now have the ability to understand that behavior in unprecedented detail. That includes everything from what people click on to point-of-sale transactions and the ability, based on online tracking, to detect emerging trends.
But have companies put this data to use? While some now have access to a wealth of data, businesses continue to work on how best to use data-driven advertising. As more companies hire data specialists, predictive analytics continue to evolve.
How Advertisers Use Predictive Analytics
For businesses, the primary goal is to apply data science in identifying the demographic segments most likely to have interest in their products. This is far removed from the mass marketing approach that dominated for decades, which involved companies buying expensive blocks of advertising time on television or in the pages of newspapers and magazines.
The concept works across all industries. For companies such as Netflix and Amazon, customer data allows them to recommend films based on an individual’s taste or even make movies that appeal to specific audiences. Others might look at what people post on Facebook or Pinterest, targeting those with an interest in their area (the newest smartphone, for example, or fashion trend).
About 40% of the world now has access to the internet. Online advertisements allow companies to tailor and target specific ads to specific groups. This not only improves the company’s ability to convert potential customers into actual buyers, but also (in theory) helps consumers because they are targeted with advertisements for items they actually want.
To accomplish this, companies take a data-driven advertising approach. This includes historic data to see how past trends played out, as well as current trends that can illuminate what product might meet a growing or future need. In this area, advertisers are moving more into predictive analytics.
The Future Of Advertising
As noted above, none of this is happening especially quickly, except among the cutting-edge companies. The use of analytics has become widespread, but businesses leaders are still determining the best use of data for their particular industry.
But those who have used Big Data see benefits, according to a study from Forbes. Of those who use data more than 50% of the time, three out of five said they have exceeded revenue goals.
One method has been programmatic advertising, which offers real-time advertising based on a consumer’s recent online behavior. In short, look at a used 2012 Honda Accord on a car site and you will find advertisements for used Honda Accords on subsequent websites you visit.
All of this is automated and targeted, two hallmarks of digital advertising. It’s also basic predictive analytics – if you looked at a used Honda Accord, you are more likely to buy a used Honda Accord.
As you might expect, predictive analytics takes things even further. Using billions of data points from millions of online users on what they viewed and what they actually purchased, software can find trends in the patterns between viewing something and actually buying. Or, more to the point, pinpoint the place where customers decided not to buy.
All of this is a work in progress, but Big Data opens up many possibilities. Knowing how to use it while maintaining the privacy of consumers is of utmost importance for businesses.
According to Forbes, many executives struggle to find the best uses of Big Data. As a result, professionals who can collect and interpret data analytics are in high demand with advertisers. Targeting customers with a high potential for buying a product or service has an obvious return on investment that ad companies are building entire teams to tap into.
Ultimately, it should also lead to consumers not having their time wasted with advertisements for things they don’t want. It’s not likely we’ll see a Super Bowl that only has commercials for products that we like in the next few years, but who knows? That day might be closer than we think.