This article talks about predictive analytics in detail. It also discusses how it can be used to help an organization succeed.
In most companies, the sales team is always at war with the marketing department. The sales team claims it is unable to do its work because of ineffective marketing. On the other hand, the marketing department claims that it cannot be effective since it does not have enough data.
Most companies have become quite good at collecting data from their customers. However, the data is only as good as how the company is able to exploit it. Most businesses today only collect huge amounts of data, but they fail at making use of it to grow revenues. To make use of big data, a big part of it relies on predictive analytics. This type of analysis allows companies to glean more information about their customers.
What Is Predictive Analytics?
Predictive analytics is the process of using data, machine learning, and statistical analysis to assess the chances of certain future events taking place. These algorithms used in this analysis come up with a predictive score based on the past.
The scores are numerical, and they represent the probability of a customer having a certain interaction with the company. For instance, it predicts their chances of making their next purchase at a certain time. This data is then used to inform the organization’s actions in relation to that of a customer. It is the insight from the patterns of customer behavior that can be used to grow sales. However, it is important to note that predictive analytics cannot define the exact behavior of a customer. Instead, it only predicts the chances that it is what they will do.
Predictive analytics gives you an Edge.
Although the use of predictive analytics has tripled in recent years, only a third of all businesses even consider using it. Thus, if you do decide to make use of it, you will be having an edge on the competition.
This advantage can vary by industry. For an e-commerce site, the use of predictive analytics can play a crucial role in pricing over time. It can also be used to show the right promotional material to the right target customers.
It is not just used to show what people will buy. It is also used in determining how effective you will be at their job. In the US military, it is now used to determine how likely it is that a person will be effective in their role. This analysis is based on analyzing data of people who have been successful in the past.
Even banks and other financial institutions have not been left out. It is thought that the use of predictive analytics has cut the decision making time by about 13 percent compared to companies that do not use predictive analytics. This type of science has proven invaluable to financial experts in the areas of fraud mitigation, collateral management, and risk.
Best Practices for Using Predictive Analytics.
When coming up with a system for utilizing predictive analytics, some best practices will help you succeed. These practices work well no matter the industry in which you intend to use predictive analytics.
- Have Clear Objectives.
You will need to define the outcomes that you want to predict. Whether they are equipment repairs, sales, or other metrics, a clear understanding of the metrics will help you get to your objective in an efficient manner.
- Have the Physical Infrastructure in Place.
Predictive analytics works better the more data there is. That means your entire organization will need to have proper interconnectivity. This helps to avoid the problem of having important data isolated in one department of your organization. There is also need to ensure that the communication tools used in different departments are effective.
- Define Your Measure of Success.
For you to tell whether your predictive analytics is working, you will need to define what success is. This way, you can tell if you are making good use of resources or if it is a huge waste of time and money.
- Use Proof of Concepts.
Before you begin predicting data, make a prediction using data that you have. If the predictions come out as you expected, you can proceed to demonstrate that the technology works.
- Take good Care of Your Data.
Getting the process started is quite easy. However, your system will be bombarded with a lot of garbage over time. It is important for you to have the right tools in place to sift garbage from real data.
- Make use of the Predictions.
Predictive analytics will no doubt use some of your company’s resources. It will be a waste of money if you do not take advantage of the data to grow profits. Hire the right experts who can assist you take advantage of any outcomes.
How you can Use Predictive Analytics.
1. Provide you with Insight into your Customers.
Sometimes, you may think you understand your customers from a few samples. However, there is also a higher chance that you are wrong. Without an accurate idea of your customers, including their age, gender, income, it is difficult to make predictions that help you grow profits.
Predictive analytics will provide you with insight into what drives your customers. You will also be able to understand what their motivation is for making a purchase. With such nuggets of wisdom, you can market to them more effectively.
2. Use it to Streamline Email Marketing Strategies.
If you have an email program, there is a good chance that it collects data for you. However, you may find it hard to make good use of the data. With predictive analytics, you are able to use the data to come up with a marketing strategy that is cost effective.
3. You are Able to Perfect the Inventory Process.
Predictive analysis can help you cut losses by preventing being out of stock. When you are able to predict how much customers will buy from you, you can make orders with that in mind. That will also help you avoid issues such as expired inventory.
4. You Can Plan for Expansion.
Predictive analysis can help you plan your expansion with a high degree of success. For instance, if you are planning to expand retail, you can make use of predictive analytics. You may find that a huge segment of your customers travels a long distance just to access your services. By utilizing data, you are able to identify the optional location where you should build your new retail outlet.
Predictive analytics uses past data to build models that are likely to succeed. However, there is still need for an effective marketing team to interpret and make use of this data.