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Online shops can predict the future! Here’s how…

It’s an eerie thought, but humans are predictable to machines. Scientists have known for ages that every action has a reaction, and over the years, people have used this on multiple levels to influence behaviour.

When it comes to online shopping, we have seen an accelerated pace of predictive science being applied. Here are some of the most influential ways online shops use predictive machine learning to fight for your cash:

  1. Real-time prediction whether a shopper will make a purchase in a specific category. This gives the online shop the opportunity to react quickly if a customer is considering buying.
  2. Post-purchase predictions are also popular. Once a customer has bought from the shop, online shops use algorithms to predict what products the customer will buy next, and start marketing them to the customer, thus influencing their future purchase behaviour.
  3. Online shops use something called Lifetime Value Prediction (LTV). This allows online shops to forecast future revenue per customer and can be used to allocate marketing budget more accurately to ensure ROMI (Return on Marketing Investment).
  4. Fourthly, online shops predict customer turnover to predict how many customers will leave. The purpose of this is to take preventative action quickly if there are signs that a customer will stop buying from the online shop. This drives customer retention, because retention is always better than acquisition.
  5. Demand prediction for categories is used to meet product demand. Online shops use this to keep up with trends, and to use the insights to merchandise and buy differently to ensure a happy and paying returning customer.
  6. In the fashion industry specifically, online shops have turned to Customer Size prediction. This algorithm allows the online shop to become more accurate with providing sizes that will fit the customer and in so doing, reduce cost of returns and increases customer satisfaction.

The industry has come a long way from predictive text in search bars. Online shops fight for every cent and they way they do it is by becoming more and more customer-centric and finding creative ways to apply technology to give them the edge.

Cassie van Wyk is the main author of this blog and has years of experience in the field of channel marketing and e-commerce respectively. He has a passion for writing and sharing knowledge, and does a lot of research in order to bring factual information to all the blog visitors. Feel free to reach out at any time!

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