Why Predictive Analysis Tools are Important for Your Business

What is predictive analytics?

When we deal with data in our workplace we can gather a ton of insights into a variety of events that have happened or are currently happening. We can discover when the last sales transaction took place, how much a person spent, how often they frequent our store, and the duration of their typical visit. All this information is extremely valuable and can be used to determine patterns that will help predict future trends. This is known as predictive analytics and is performed with predictive analytics software.

How does predictive analytics work?

With a comprehensive system and software, predictive analytics can be an excellent tool to help businesses predict future events. The most common steps in predictive analytics are

• Analyzing existing data to learn about statistical patterns

• Creating a model with a set of rules that will describe how to apply the patterns to the new data

• The new data will then process through the model and the set of rules and make predictions to what may happen in the future.

Predictive analytics tools don’t just work with only a few pieces of data. They need to be supplied with a record of older, high-quality data to make predictions.

High-quality data. All data must be complete and up to date for a higher success rate. Projections can not be made on incomplete or botched data and if they are, it will be extremely inaccurate and difficult to gain any useful future insights.

Use AI or an expert data scientist. There is a certain art that goes into creating the models and rules that determine predictions of data. Most bigger companies use automated machine learning (AI) to make predictions. Complex statistical models are required in order to obtain accurate predictions and actionable insights.

Leave room for ambiguity. Nobody can predict the future with exact certainty but we can put faith in the accuracy of our models and rules and lean into the confidence that comes with our understanding of these models. A great example of this is weather forecasting. The weatherperson can’t see into the future but they can provide enough information that is useful and most often correct, even if slightly imperfect.

The predictions should provide results. Once a prediction is made, the future should tell if the prediction was indeed accurate or at least provide enough insights to take action.

Where is predictive analytics used?

A great example of predictive analytics being used is Netflix. The mega movie streaming service uses the best predictive analytics software. A combination of AI-powered algorithms based on the user's watch history, search history, demographics, ratings, and preferences shows 80% accuracy of what the user may want to watch next. A few more examples are

• Retail. Predictive analytics can be used to determine if a customer is unhappy and how likely they are to leave and then tries to prevent the loss before it happens.

If you’re interested in starting with predictive analytics follow these suggestions.

Gather your data with time series analysis.

Time series analysis refers to data that is changing in value over time. An example of this is the record of daily sales your store sees, invoices, operation costs, and annual budgets. This also includes data such as the number of visitors to your website or the fluctuation in temperature in a fleet of transport trucks. The data you can gather is limitless but it must be consistent and accurate.

Choose a few simple yet effective modeling techniques.

Cluster analysis creates graphs that can be analyzed to find and specify a specific audience emerging. This could be done in a model of age vs spending habits.

Recommender systems such as recognizing patterns of customer behavior. For example, a customer who bought X also bought Y so let’s recommend Z in the future which proves similar to their interests.

Partner with a company that can do it for you!

Sometimes it can be of more value to work alongside a company that has expertise in predictive marketing software. If you do not have a dedicated data scientist on your team or an AI-powered software it can be more beneficial to hire someone and have accurate results. Companies such as Mapsted offer predictive analytics as well as software to collect location analytics from your customers that can be directly used in future predictions.

If you’re wondering if your business can benefit from implementing predictive analytics, the answer is yes! Almost every business can gain insights and pull value from having strong data that helps with future business decisions.

A Passionate writer with a great interest in technology. Loves to write and learn more about the latest developments in the tech industry.