How predictive analytics came about
In today´s economic climate, an organization needs to have a competitive differentiation. There must be a way for businesses to outsmart its competitors and several ways for it to be smarter in handling day to day operations.
We have come to an age where we have voluminous amounts of data and a time when we know that these data if handled well can lead to valuable business information. This is why businesses clamor for predictive analytics, they want to improve their operations and beat their competitors in the market.
Predictive analytics does not tell us exactly what is going to happen in the future but it forecasts probabilities through good historical data, statistical analysis, and machine learning techniques among many others.
How important is Predictive Analytics in a business setting?
With predictive analytics, a business can predict how much a customer will buy in a span of a couple of months to years, it can suggest other products apart from the one already chosen to increase the chances of closing a sale or of increasing upsells, and it can help a business recognize behavior that can lead to losing opportunities.
Predictive analytics also allows marketers to recognize the trends in the customer life cycle from the time it is still a cold lead to becoming a customer to growing within the organization to dropping out and to winning it again. Predictive analytics can help marketers achieve their objectives by ensuring they can predict with a high degree of reliability the next move of the customer.
In terms of daily operations, predictive analytics can find errors, fraudulent transactions, optimize allocation of resources, optimize capital asset pricing, and improve risk assessment measures and many more.
How does it work?
Predictive analytics is made possible with good historical data. It starts out with collecting data from various sources such as data on customer demographic (age, gender, location). There also has to be good data on what products they usually buy, when they buy it, what other products do they buy along with it, how long it usually takes for them to buy these products, or what they use to pay for these merchandise. All these data can allow you to analyze their buying behavior and thus be able to realize a pattern.
Statistical Analysis and Modeling
The Statistical analysis is the main tool used for predictive analytics. Analysts try to correlate several independent variables to each other and find the perfect model for it. They try to look at the age of the buyer, the products they usually purchase, the time of purchasing, what other products are being purchased, etc. until they come to see a pattern in product sales. From this, they will usually deploy a scoring mechanism of which a higher score would mean a higher chance of a closed sale.
Assumption making and Monitoring
Predictive analytics banks on the idea that the future will remain relatively similar to the past. This is the reason why behaviors and trends are being studied because analysts think that these behaviors over time will continue to be kept. All of the models used in the statistical analysis and modeling stage makes big assumptions.
But no future is ever certain. Behaviors and trends can change so a major factor to ensure success in predictive analytics is timing. It is important to monitor the different variables, the assumptions of the analysts, and the consequences if these variables change over time.
How do I outsmart my competitors?
The easiest way to outsmart competitors is by investing in an easy-to-use software like Performance Canvas by DSPanel. Today´s technology already provides an integrated environment that allows for predictive, descriptive modeling, data mining, forecasting, simulations, and optimization.
Performance Canvas by DSPanel streamlines your data mining process in order to forecast with a high degree of reliability. Performance Canvas provides an integrated product that goes through the entire analytical process from planning to data collecting, to analyzing, to reporting and dashboarding.
To learn more about Performance Canvas powerful features or see a demo of this integrated reporting, budgeting, forecasting, and consolidating software, visit www.performancecanvas.com or email us at [email protected].
DSPanel offers cutting edge technology platform for business analytics, planning, and visualization. DSPanel designs, builds, and operates with the end users in mind. Performance Canvas was created by DSPanel to answer the unarticulated needs of the market not addressed by previous available solutions. With Performance Canvas, information is transformed into valuable business insights for the business executives to utilize in their decision-making process. DSPanel currently has over 2500 organizations deploying their solutions.