RANCHO PALOS VERDES, CALIF.—Prediction may be the most valuable tool for a marketing team, giving a firm the power to influence its own future by driving marketing decisions and strategies, said Dr. Eric Siegel, Founder of Predictive Analytics World.
“The future is the ultimate unknown, and there is no more coveted knowledge than, ‘What’s gonna happen?’” said Dr. Siegel, who gave the Keynote Presentation, entitled Predictive Analytics for Marketing: Learning from Data to Predict at the Legal Executive Institute’s Marketing Partner Forum on Thursday morning. “Prediction is really the Holy Grail of marketing.”
He said that many people view the concepts of predictive analytics and the use of big data with equal measures of boredom and confusion. But it doesn’t have to be that way, Dr. Siegel explained. Predictive analytics is simply technology that learns by experience—and that experience is represented by data. “But data is a boring word,” he said. “It’s a deal-killer at cocktail parties; I know from personal experience…”
The smart way for companies to look at data, however, is to view it as the aggregate representation of your company’s history, the sum experience of your firm’s interaction with its customers and clients, Dr. Siegel said.
For a law firm, that perspective could be extremely useful, allowing an insightful firm to glean, for instance, what clients responded best to personal contacts or certain advertising campaigns, and what percentage actually purchased legal services and how frequently.
Of course, getting a law firm’s massive amount of customer data—client demographics, purchase histories, outreach responses, advertising preferences—into a database that can be number crunched to a useful extent probably “represents about 80% of the hands-on time in a predictive analytics project,” Dr. Siegel noted.
All this data can result in real-world value for a firm, however, as Dr. Siegel illustrated with a simple example: Company A wants to send out a direct mail brochure to its entire client base of 1 million customers, at a cost of $2 per mailing, and receives a 1% response rate for its trouble. Each individual response returns roughly $220 in revenue. That means, in this hypothetical case, the firm spent $2 million on mailing, and received $2.2 million in return, leaving a $200,000 profit.
However, he continued, Company B could use predictive analytics to identify a subset of the client base, say 250,000 clients, who based on past behavior showed higher than average response rates. In this way, Company B could receive a 3% response rate from that group while cutting their mailing costs by 75%.
In the end, targeting that “hot segment” of their client base would result in a final profit of $1.15 million, roughly five-times Company A’s result, Dr. Siegel noted. “As you can see, a little prediction can go a long way—and predictive analytics doesn’t even have to be very accurate, but as long as it is better than guessing, that is often enough to deliver great value.”
Law firms that begin to understand the use of predictive analytics in this way allows those firms to better allocate their limited resources and drive client-retention strategies with more insight. And as firms’ marketing and business development budgets continue to be strained in the current tight market environment, any edge can be of huge importance, especially one that could allow firms to reduce marketing costs and target those clients which historically have shown strong legal buy preferences.
In the end, those firms with enough data to learn from it could forge a strong advantage over their competition, Dr. Siegel added. “In life there are no do-overs,” he quipped. “So the only recourse is to predict what is the most likely outcome and target your strategy to best take advantage of that.”