By Greg Silverman, Sep 28, 2020
Even though humans are creatures of habits, it has historically been difficult to predict their behavior. Slight changes in market conditions, marketing tactics and social networks all have an impact on whether a consumer purchases your product over an alternative, so how do businesses control these outcomes?
Advancements in technology and a better understanding of human behavior has helped make accurately predicting consumer behavior possible. As businesses move away from traditional media mix models and embrace prescriptive analytics and consumer-centric simulation, they are able to make better, faster decisions to reach their target audience.
In times of uncertainty, the power to predict human behavior is more important than ever in helping organizations take strategic action. Having these capabilities in-house is what allows for decision-makers to run scenarios when needed, helping them identify sensitive consumer touchpoints in minutes rather than weeks or months. Let’s explore how predicting human behavior is made possible through prescriptive analytics.
Even before the rise of eCommerce, businesses used marketing mix models to show the correlation between in-store sales and time-specific media channels such as TV, radio and couponing. This gave brick-and-mortar businesses insight into how their marketing efforts affected sales, but still failed to acknowledge additional factors that influence consumer behavior.
With the progression of the digital age, businesses turned to multi-touch attribution (MTA). These models helped businesses understand how digital activities such as advertising and PPC boost sales. However, MTA models were still limited to online activity only, and were not designed to account for real-world decisions. Even with these constraints, multi-touch attribution models have been widely adopted by marketing teams, and eMarketer predicts that by this year, the adoption rate of this method will increase to 88%.
Today, analytics consultants typically use a blend of media mix modeling with attribution, especially if their business conducts sales both online and in-store. However, using either of these methods as the primary means for demonstrating ROI and guiding marketing strategies has its limits. These models only go to show correlation between past marketing efforts and business outcomes, and as we all know, correlation does not imply causation.
Ultimately, media mix and attribution models cannot acknowledge the consumer as part of their formula. These methods suggest that if businesses invest a certain amount of money in marketing through a new channel, consumer perspectives will change. If you know anything about human behavior, you know this is rarely the case. Rather, consumer actions are both independent and fluid, yet highly influenced by social networks and market conditions.
Attribution models inform businesses on what happened (or what could happen), but not how to get there. Only by predicting consumer behavior are businesses able to achieve accurate models that direct them to influence consumer action in their favor.
After identifying the missing piece to traditional modeling methods, it’s time to take a deeper look at how to understand consumer behavior. This begins with identifying the consumer’s original state. Every individual exists in their own state that influences their purchasing decisions. This includes what products and brands they are aware of, their understanding of the alternatives and, perhaps most importantly, what drives them to make a purchase.
While marketing methods to increase brand awareness are more straightforward, the consumer drivers are what marketers must focus on to appeal to their target segments. Each potential customer has a different set of criteria that leads them to purchase one product over another. This includes pricing, perceived utility, quality and more. Not only are these drivers unique to each consumer segment, but they are also weighed differently. For instance, one customer may be driven to purchase a less expensive product because that is their main driver, while others weigh quality more heavily in their decision making.
This means each consumer has a unique algorithm that determines why they make the choices you do. When businesses identify different target markets, they group consumers with similar drivers together to tailor their marketing strategies. However, these criteria fluctuate frequently, with Business 2 Community reporting that 85% of path-to-purchase loyalty drivers have changed order in the past few years.
Only an agile simulation model equipped with the power of prescriptive analytics has the power to model these complex and fluid behaviors. These models capture the consumer’s original state along with external and internal network factors so businesses are able to tailor their actions to enhance the customer experience with their brand, and ultimately entice them to purchase their product over an alternative.
While media modeling assumes the consumer state is only influenced by marketing actions, simulation and prescriptive analytics take into account a number of factors that affect customers. This includes consumer drivers. While the factors that drive purchasing decisions may remain static for a lengthy period of time, during periods of uncertainty or unexpected societal, political or even scientific events, they may drastically change their weights. For instance, during a global pandemic, consumer drivers changed and perceived utility of items such as hand sanitizer and cleaning products skyrocketed while travel related products were put on the back-burner.
Modeling human behavior accounts for this shifting of the consumer state and allows businesses to pull strategic levers in a simulation to find out which course of action enhances the customer journey the most. In an unpredictable market, with a contracting customer base and new competitors, this knowledge is essential for identifying new opportunities for growth and gaining shares.
The Concentric platform differs from other modeling options because of its human behavior forecasting capabilities. By capturing market dynamics in one, easy to navigate dashboard, businesses are able to understand the customer journey and receive recommendations for how to achieve their desired outcomes. Contact Concentric today for more information on how prescriptive analytics helps businesses predict human behavior in times of uncertainty.