With privacy laws cracking down on how advertisers use third-party data collected from other organizations, first-party data is in the spotlight more than ever. While gathering it gives you information about your customers and the actions they’ve taken, it can also be leveraged for predictive and advanced analytics that can help you identify the actions they’ll take in the future.
The Pareto Principle states that roughly 80% of effects come from 20% of causes. In marketing terms, that likely means that 20% of your most valuable customers make up 80% of your revenue. Keeping that in mind, it’s important to identify your most valuable customers and understand their behaviors so you can be more efficient with your advertising spend and better understand your revenue makeup. You can do this using your first-party data to create predictive models like propensity and lifetime value (LTV) models.
Why Predictive Models Matter
Predictive models are created with customer-specific information. So, instead of analyzing data from a column-level summary made up of users who may have differences, predictive modeling uses a row-level analysis of one user for more accurate insights and, ultimately, more successful predictions.
Why Propensity Models Matter
Creating models that calculate a customer’s likelihood of either converting or churning (dropping out of your funnel) can help you identify ways to engage customers and to intervene when you’re in danger of losing them.
Why LTV Models Matter
Building a model that predicts customer LTV can help you make important bidding and optimization decisions. Traditionally, you might optimize your media strategy to cost per action (CPA) or return on ad spend (ROAS). These actions focus on the short-term and don’t leverage profit or margin bidding or repeat versus new customer bidding, and they don’t take into account if specific actions or products are more valuable in the long term.
You can take a more strategic, longer-term approach to growth by optimizing to LTV. You gain insights into customer-driven revenue, identify which platforms drive the most valuable customers and plan your budgets more effectively.
Working with your first-party data to extrapolate future behavior creates insights that can change your entire marketing strategy. To get the most value from your data in an efficient manner, you need tools that can automate processes for you.
Download our guide, “Take Your First-Party Data Further with Google Cloud for Marketing,” to learn about the tools that can help you succeed and more.