Predictive Analytics is a category of Data Analytics that offers predictions on future events based on historical data and analytics methods, Statistical Modelling, and Machine Learning-based models. Predictive Analytics is popular for generating future insights with precision. With the help of various Predictive Analytics tools, companies, enterprises, and startups can generate insights, forecast trends and customers behavior well ahead of time.
The technology of Predictive Analytics has grown so much due to heavy investments by big corporations, enterprises, companies, small startups, etc. And seeing the growth, it’s predicted to grow at a CAGR of USD 10.95 billion by the year 2022.
Predictive Analytics uses many resources to create insights. These resources are Big Data, Statistical Modelling, Machine Learning, Data Mining, Machine Learning, some Statistical and Mathematical algorithms, etc. Companies use this technology to sift through historical data to predict future trends and events predicted to happen in the future course of time. If you are aiming to break into the ML domain, check out Machine Learning Certification.
These technologies enable such businesses to identify risks and hidden opportunities in their venture. Various models could be created for meeting different purposes and thus help in arriving at an informed decision.
Benefits of Predictive Analytics
Predictive Analytics has helped in making businesses venture out seeking and making the most out of opportunities rather than spending their time guessing the right chance. Predictive Analytics puts insights about the future to the table and helps those who adopted it by reduced expenditure and time spent to maximize productivity and profits.
Retailers use Predictive Analytics models for forecasting inventory requirements, managing shipping schedules, and handling store layouts, all in order to maximize sales. The airline industry uses these models for pricing their ticket costs. Another industry that heavily relies on these models is Hotel and restaurant chains. They predict the number of guests, or occupants they expect each day and then decide the level of preparation that they must do to maximize their profits during the peak time and reduce wastage of resources during low demand periods.
These models help businesses attract new customers, retain old ones, and help them grow through their services and products. Predictive Analytics is also used to detect anomalies and criminal activities, to fend off any damage to the business before it happens.
Predictive Analytics Applications
Many organizations are using it for various purposes and benefits from their applications. Here I will list down some of the major applications of Predictive Analytics.
Aerospace: Use it to predict the impact of maintenance on fuel use, reliability, uptime, etc.
Automotive: Create models by storing data about the quality of products that are used inside an automobile, and use that to manufacture newer cars and study driving behaviors for developing better Advanced Driver Assistance Systems. Read Machine Learning Tutorial to get more information.
Financial Services: Predict market trends, the impact of new laws, regulations, etc.
Retail: Create a fully functional model for storing data of users using their services, and predict which action like giving discounts, or giving free products, etc., will help you in enhancing completed transactions.
Law Enforcement: Using data from a specific place, you can decide which associated place will be seeing a sharp increase in domestic cases and crimes. And will also answer which areas will see a decrease in such issues? Using this, you can have additional support or monitoring to curb such incidents to keep the community safe.
Predictive Analytics Models
Many Predictive Models are used by various sorts of companies to maximize their profits. Some of the most popular models that are used by companies are:
Customer Segmentation Model: Segment customers based on similar characteristics and other purchasing behaviors.
Customer Lifetime Value Model: Based on historical data, this model will help you identify customers who will invest more in products and services.
Quality Assurance Model: Quality matters the most for businesses as it helps in retaining customers and adding new to their chain. This model will help you identify defects and other downs to avoid offering defective services or products to customers which will make the whole customer experience bad.
Predictive Maintenance Model: This model will help you forecast the chances of essential equipment breakdown.
Predictive Analytics Techniques and Algorithms
There are many algorithms and techniques which are being used for creating Predictive Analytics models. These are Regression techniques, decision trees, neural networks, clustering algorithms, etc. All these are used for various use-cases. Every business has different needs, and so does a need for multiple models which will plug in insights for maximizing customer retention, profits, and reduced expenses.
How must an organization start with Predictive Analytics?
Implementing Predictive Analytics isn’t easy. It’s a task that companies and businesses that are willing to invest only can continue their association and dependency on these models to make informed decisions. If you are planning on to start using Predictive Analytics in your workflow, then start by creating a low expense limited-scale project and then slowly build it by giving your effort and time.