How Predictive Analytics Enhances The Effectiveness Of Your Business Operations?

Predictive analytics is the concept of using existing data sets and information to analyse patterns and make predictions with a certain degree of reliability, about the future of the business or the sector to which it is applied. Predictive analytics is the next stage of business analytics, which makes full use of big data's potential by identifying existing patterns and using them to determine future opportunities. One should remember that predictive analytics does not give you the ability to see in to the future; it merely predicts what might happen based on the past data. It is a potential gold mine for businesses, as it can open up a completely new world of possibilities and opportunities, which were previously unexplored.

The predictions made by this technique need not be completely accurate to deliver tangible business value. For example, if this technique determines that a certain segment of customers are more likely to stop buying your product, you can provide targeted retention offers to just that segment. Without predictive analytics, you will have to provide discount to your entire customer base and incur more expense in order to retain some customers who are likely to deflect from your brand.

There a number of applications of predictive analytics. Some key applications are listed below:

1. Targeted marketing

The goal of marketing is to generate more product or service awareness. Online marketing involves getting more views and clicks from a prospect customer and increase response rates. This can be done by integrating data from the web and social media interactions and using it to predict the effectiveness of a particular marketing strategy on the respective customer segment. Such data can help to drive innovative marketing techniques based on prospect’s predictive scores. For example, predictive analytics can be used to find which advertisement is a prospect more likely to click on and accordingly display the best ad depending on the probability of it being clicked. This will help in reducing the cost of marketing and will keep the customer happy, by only displaying relevant ads.

2. Product recommendations for existing customers

Predictive analytics can be used to provide product recommendations to your customers based on their previous actions and interests on online platforms and purchases. This can help drive growth in sales and generate more revenues from the customers who are not aware of new products launched by your business. The number of clicks on each recommended product can also provide an understanding of what products are in higher demand and the reason behind their success. This can help in managing the stores and control the production or sourcing of certain items based on their predictive scores. Thus, it can help in increasing the overall revenue.

3. Optimizing the revenue

The pricing of a product should always be determined taking a number of factors like demand, brand value and specifications of the product in to account. Predictive analytics can help in determining pricing and bundling of different products by using the past sales and product data. This can help in driving maximum sales and generate more optimized revenue in a predictable manner.

4. Predicting customer behaviour

Predictive analytics can also be used to predict how a customer would behave during the purchase of your products. It can help your business to determine those customers who are more likely to deflect to other brands and help you create retention offers for them to minimize the damage. A customer retention campaign introduced without the use of predictive analytics may cost a lot more.

5. Alliance valuation and risk management

Predictive analytics can also determine how business partnerships will affect the growth and revenues of an organization. Making investments in other companies and entering in to alliances with them might involve a certain amount of risk. Predictive analytics can help you to analyse the profitability of such a venture by processing huge amount of big data present on the acquisition or partnership targets in the market. For e.g. - almost all businesses have accumulated data on public servers, which contains information like market performance, growth, etc. This data can be easily accessed by most analytics software tools and is converted in to valuable information, which can help predict if a business is a good acquisition target. Most organizations use these techniques to determine viable candidates for acquisitions, partnerships and vendors to maximize their profitability.

Predictive analytics techniques has a number of useful applications. However, lack of data is one factor that prevents businesses from using these techniques. Data is one of the most important assets required for predictive analytics. Creating a single data warehouse for all your customers is a challenging task. All the data regarding the purchases a customer has made, the attributes of the product that he/she frequently buys, the brand of the product and the price range should be gathered at one place. Then all this data needs to be classified according to age groups, gender and other demographics to derive patterns. After accomplishing this and storing in to a single data warehouse with unique id assigned to each customer, predictive customer analytics can be carried out.

There are a number of free and open source software development tools available for predictive analytics on the web, which can be used to create custom solutions for each business. However, most of these tools do not have all the features required to derive full potential out of the available data. So, it is recommended to consult professional technology consulting companies to help select the best predictive analytics solutions for your organization. These consulting companies have experienced teams and existing custom implementations for popular business analytics tools, which can help in providing customized predictive analytics solutions that are tailor made to suit your business requirements.