Demand for predictive analytics tools has risen dramatically in the past few years. Although the tools have been around for decades, more and more companies are grasping the reality that predictive analytics is a competitive necessity.
Predictive modeling is used to support small business initiatives that were numerous. However, the growth in demand can be attributed by maximizing the life of a firm's most valuable customers to remain competitive in today's market. Opportunities and customer flight risks can be identified by applying algorithms and model scores to a database.
Customer retention is a must, especially when considering it is more expensive to get new customers than it is to keep current ones. A retention approach can be accomplished when model scores are placed on the customer database. Intervention could be taken to keep that client if a company knows that a client is very likely to turn to a supplier.
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According to a recent article in CRM magazine, the return on investment (ROI) can be important for businesses using predictive analytics to leverage customer retention strategies. A big British telecommunications company, Orange U.K., kept an additional 4 percent of the most valuable customers monthly by applying predictive modeling scores to ascertain customer flight risk.
This equaled into an almost $40 million per year operating profit. The us-based company, 1-800-Flowers, fostered customer retention by 10% during the downturn. This equated to an additional $40 million in earnings.