Every business owner out there wants that extra competitive edge. Big data has been making waves in the business world for giving companies that added advantage. However, a lot of businesses feel like big data is cost-prohibitive, or that it’s an advantage limited to companies with dedicated IT departments or massive budgets. Ecommerce businesses have been especially slow to the punch.
However, with big data, the landscape is changing. It’s becoming increasingly more affordable and accessible. With software, data analytics consulting, and various resources, eCommerce companies have the opportunity to get into the big data game. Predictive analytics can provide eCommerce businesses with an array of advantages and insights.
The importance of predictive analytics in eCommerce is varied and multi-faceted. Let’s dive in and break down how predictive analytics can positively impact eCommerce businesses.
The Key to Customer Insight
What big data and predictive analytics really do for eCommerce businesses is to provide unparalleled insight into customers and consumers. Before data analytics, marketing to shoppers, and building your online store required a lot of guesswork. Now, online stores can peel back the layers and really see what’s working and what isn’t.
There are several direct things data analytics allow you to see:
- Customer Experience: How do customers feel when they’re on your website? How do they feel while shopping?
- Customer Engagement: What are shoppers engaging with on your online store? When are they leaving your website? How long are they staying?
- Customer Habits: What kind of buying patterns exist with your shoppers? Is there a pattern?
- Customer Preferences: What types of images, processes, or price points do your shoppers prefer? Do they like personalization or the integration of customer support?
These are just a few things that you can see with comprehensive data collection and analytics. Some metrics are pretty hard and fast. For instance, if everyone leaves your site when they visit a specific page, there’s likely something wrong with that page. That’s a valuable insight. Another example, if your buyers continue to abandon their cart, there is probably something wrong or complicated with your checkout process.
This type of information comes from data analytics. It’s valuable to know and can help you make some quick changes. The real magic, though, is in predictive analytics. It’s about taking a broader look and a more in-depth dive into the numbers and patterns. Then, using that information to predict buyer behavior. Being able to use predictive data is sort of like being a fortune teller for your own business.
Predicting the Future with Predictive Analytics
So, what kinds of things can you predict? How can eCommerce businesses use predictive analytics? With the right tools, the possibilities are boundless.
Predictive Analytics Allow eCommerce Companies to:
1. Increase Customer Engagement
Predictive analytics looks at all the different things that contribute to desired engagement. From newsletters to social media to promotions, and more, predictive analytics compiles the results of tasks like these. Then, it’s easy to create a profile of customer behavior, and predict what sorts of things will work best for your customers in the future.
2. Predict What Their Customer Will Most Likely Buy
Similar to predicting customer engagement, analytics allow eCommerce owners to see what types of products their customers buy the most. Conversely, it’s easy to see what product types don’t do well. Moreover, eCommerce companies can use analytics to study potential customers inside of their target demographic and predict what kinds of products will sell the best.
3.Figure Out the Highest Price Buyers Are Willing to Pay for Items
Generally, online stores have used split testing to set and test prices. With predictive analytics, it’s possible to do variable pricing in real-time. Using data from customer activity, competitor pricing, available inventory, historical pricing, and more, you can set variable pricing to ensure the customer pays the highest possible price. Companies like AirBnB and Uber do this regularly.
4.Decrease Fraud
Predictive analytics allows online retailers not just to have fraud prevention but to incorporate fraud detection. Based on historical data, it’s easy to analyze patterns and establish normal behavior. Once a baseline is established, it’s possible to create algorithms or use software to recognize unusual patterns and prevent fraud.
5.Run More Effective Promotion
Promotions are an essential part of any eCommerce business’s marketing strategy. Similar to the above, by using analytic data and historical patterns, it’s possible to gain enough insight to know which promotions will work most effectively.
6.Decrease Overstock and Prevent Being Understocked
Inventory stocking is one of the most challenging parts of running an eCommerce store. It’s terrible to have too much product, because it’s a waste of money. It’s even more awful to have a huge demand, but not have the product. With predictive analytics, it’s possible to look at historic patterns both in your business and in the industry, and predict when a big surge might come in. It’s also possible to predict when sales might lull.
Predictive Analytics: The Big Picture
Big data is a tool to help make decision making easier. It’s also a tool to improve customer service and experience, thereby increasing customer retention. It takes a lot of knowledge and testing to figure out what works, and analytics takes a lot of the testing out, by using data versus dollars to get answers.
Getting started with using data analytics can be overwhelming because there are so many moving parts. There’s an abundance of software solutions and automation platforms on the market. There are also data analytics consulting firms that specialize in helping decipher predictive analytics.
Ultimately, the more a business knows about its customers and industry, the better their profits will be. The eCommerce space is highly competitive, so any added insight is a huge advantage. The barrier to entry keeps a lot of businesses afraid of jumping in. However, every day, it’s becoming increasingly more approachable and attainable for businesses of all sizes and budgets to get in on predictive analytics.
And, here’s the thing, if you’re an eCommerce business owner, you don’t have to have all the bells and whistles. You don’t necessarily need to have analytics on every link in the chain. Instead, look at your processes objectively and figure out your goals. Then, pour your energy into optimizing your insight in the areas that contribute to that goal.
If you can, hire an expert data scientist, marketing firm, or a data analytics consulting firm. If it isn’t in the budget, research and start with one tool at a time. It’s just vital that you get started on the predictive analytics train, because there’s a lot of potential revenue to be gained.
