Demographic data is tremendously useful for marketing. Knowing the demographic profiles of your customers can improve your ability to market to them and allow you to prospect for new customers with similar profiles. But demographics only give you a very general view of your customer. Knowing somebody is of a certain age, income, or gender provides some insight into their behavior because on average they are more likely to behave in a certain way. But if we really want to know what they are likely to do we can gain much more insight by using behavioral data – purchase history, help desk calls, marketing campaign responses, and any other activity that a customer may have with your company.
We were working with a client recently that had been using our consumer database for prospecting. They had some great success with the prospecting model that we built and started looking at other ways that they could use our data to solve some of their business problems.
They asked us to build an attrition model so that they could proactively engage customers that were most likely to churn. This is where we found the limits of the data we were using. We were only able to get a small amount of lift when trying to predict attrition using the appended demographic data. From working on previous projects in predicting churn we knew that behavioral data would be much more predictive. Unfortunately this client’s marketing department did not have the data available from their operational systems. We are now working with them to gather the internal data that they need in order for their retention project to be successful.
Of course there is always a flip side to anything, including knowing more about your customer. Target received some unwanted publicity earlier this year for being a bit too good at predicting their customers’ behavior: