Predictive Modeling: Sales Forecasting, Customer Lifetime Value

The broad term of predictive modeling can therefore be undertaken to refer to statistical approaches and the related methodologies used in forecasting future trends from past data. In the marketing domain, predictive modeling has two major uses: sales forecasting and estimating the customer lifetime value. Sales forecasting is a process of evaluating sales volume in the future using the historical records of sales performance and external factors that exist. Specifically, sales forecasting helps a business make better decisions in purchasing inventory, acquiring resources, and planning for the future. Customer lifetime value, however, defines what a client is worth in terms of the total possible dollar amount commerce can mop up from him or her in the duration of the interaction. By using CLV, marketers can recognize valuable customers, segment their target clients by marketing, and ultimately shield their customer acquisition costs. Some of the techniques used in the CLV estimation include regression analysis, machine learning techniques, and cohort analysis among others.