Bitesize: What is a propensity model?

Name: Vertical Leap
Address: 6 Boathouse, College Road, Portsmouth, PO1 3LR, GB
Telephone: 02392 830 281

19 Apr, 2021

Categories: Data & Analytics

2 Minute Read

A propensity model is a statistical analysis of your target audience that predicts their future actions, using a range of datasets that typically includes demographics, psychographics (eg: interests) and previous behaviour. For example, you could create a propensity model for existing customers using their personal data, purchase history and actions between each purchase to predict their future purchase decisions.

How do marketers use propensity models?

Propensity models are used to predict the future actions of specific audiences. If we take the example above of a model that predicts the purchase decisions of existing customers, there are several ways you can use the outcomes of this model to enhance sales and marketing campaigns:

Increase the frequency of purchases
Increase the value of purchases
Attribute purchases to campaigns/interactions
Identify drops in purchase rate
Identify churn dangers
Calculate customer lifetime value
Prioritise high-value customers

For example, your model might determine that the average customer makes a purchase every 227 days. From this, you can calculate that increasing purchase frequency to >200 days will lift annual revenue by 13+%.

Now, you have a clear goal to inform campaign ideas designed to increase purchase incentive in the build-up to your 200-day target, increase the percentage of repeat buyers and other objectives that will reduce the average time between purchases.

Propensity modelling predicts the future actions of your target audiences and identifies the triggers that inspire them. This allows you to influence decisions before they’re even made. Instead of responding to historical actions, you’re reacting to signals that suggest people are about to make a choice and get your message across while they’re still open to influence.

So you’re not trying to change someone’s mind; you’re helping them make it at the key moment.

How to start with propensity modelling

Propensity modelling relies on large volumes of relevant data to make accurate predictions. This starts with accurately attributing historical actions to campaigns and interactions across the consumer journey, so that you can build a library of signals related to each specific action – eg: the frequency of product page views before a purchase is made or the number of checkout attempts before cart abandonment.

You can read more about attribution here:

The more comprehensive your datasets are, the more granular your propensity models and predictions will be – provided your attribution is accurate.

The golden rule with any machine learning application is that the output is only ever as good as the data you feed into it. With 57% of marketers feeling overwhelmed by data, many fall at this first key hurdle and never realise the full potential of strategies like propensity modelling.

Want to chat to our data scientists?

For help with building your own propensity modelling systems, you can speak to our team of data scientists by calling 02392 830 281 or submit your details here and we’ll call you back.

Henry Carless

With over 12 years’ experience in search engine marketing, Henry has extensive knowledge of paid search strategy and delivery. He has managed advertising campaigns for companies of all sizes over a wide range of industries, from start-ups to multinational partnerships with seven figure PPC budgets. Henry joined Vertical Leap in 2012 as a PPC specialist, managing and delivering campaigns for clients and has since become one of our Data Scientists. He has what could be considered an obsession with data analysis; measuring and tracking everything he can in order to fully understand how our adverts perform. In his spare time, Henry enjoys 3D printing, Dungeons & Dragons, home brewing, and golf.