Predictive analytics is changing the way businesses across almost all industries are predicting, planning, and adapting to future events.. But what happens when businesses don’t utilize this powerful new technology?
Here we look at some of the scariest possible outcomes of failing to adapt to the onward march of predictive analytics.
What Is Predictive Analytics?
Predictive analytics is a field of statistics and analytics that involves the interpretation of data with the intention of estimating related future outcomes. The theory behind the technique is, essentially, that by looking at historic and current data, the likelihood of certain events happening in the future can be predicted with accuracy.
The field of predictive analytics encompasses several different disciplines, including machine learning, statistics, data modeling, and more. Coupled with the power of modern computers, these techniques mean that the scale, accuracy, and affordability of predictive analytics are all growing rapidly, so an increasing number of businesses are using it as part of their day-to-day operations.
A simple example of predictive analytics in a business context could be a marketing department looking at existing data to predict the buying habits of a particular demographic. These predictions could then be used to target specific customer segments with relevant products and targeted campaigns to increase sales volumes.
Examples of Predictive Analytics in Action
The applications of predictive analytics are not just limited to just one or two industries. It can be an extremely useful tool in almost any context. Here are a few prominent examples:
Healthcare is arguably the area where predictive analytics can have the greatest impact of all, as it has the potential to directly influence people’s quality of life and even mortality rates. An example of predictive analytics in healthcare is for the estimation of flu outbreaks in different areas. These predictions could be used to more accurately estimate the number of vaccines prepared in advance, saving both resources and lives.
Banking and Finance
Money affects and is used by almost everyone on the planet, so a huge amount of meaningful information is created every day for banks and financial institutions to use in an attempt to foresee future events. A good example of banks using predictive analytics is the prediction of fraud, and therefore the ability to prevent it more effectively. In addition, banks can use analytics to predict the rise and fall of investment markets. This can result in smarter investing strategies, helping customers and the institutions themselves make more money.
By leveraging predictive analytics, telecommunication service providers will be able to predict potential customer churn and take positive action against it. This enables service providers to increase average revenue per user (ARPU) and customer lifetime value.
Here is a recent case study of how a leading telecom service provider in Asia leveraged predictive analytics to decrease customer churn and increase ARPU
Advertising is one of the world’s biggest industries, and predictive analytics is already transforming the way it works. By looking at the habits and interests of consumers, advertisers can predict the types of advertising people are likely to respond to positively, helping companies to target people more effectively.
Retail and E-commerce
Retailers, both high-street and online-based, can benefit hugely from the insights offered by predictive technology. For example, a clothing retailer could use data on customer buying habits and past trends to predict what will be fashionable in the coming months. These predictions could help them to estimate the number of products to stock in certain styles, improving inventory allocation and boosting sales.
Here is a recent case study on how a leading fashion retailer in China leveraged predictive analytics to improve store assortment and maximize sales productivity (i.e. revenue/ sq.m)
Nightmares Businesses Face Without Predictive Analytics
Losing The Competitive Edge
With so much commerce now based online, businesses can pop up and take over in an incredibly short space of time if they offer what customers want and the competition doesn’t adapt. Just look at companies like Uber and Airbnb.
Predictive analytics might not make you the next Amazon overnight, but it certainly can help you understand your customer preferences and their future needs. This helps you stay ahead of your competition, and at the very least prevent you from falling behind your competitors.
Incurring Additional Cost
A huge benefit of predictive analytics is its ability to reduce costs across all kinds of different areas of your business. One obvious way is that it can help companies avoid unnecessary and expensive market research. Market research budgets can be massive, but there are now far more affordable ways to gain insight into the market such as machine learning algorithms, cloud computing power, and revolutionary AI software to predict market trends. This is more affordable and effective than traditional market research methods.
A further way that organizations can reduce costs is through more efficient purchasing. By using predictive analytics to estimate future demand for products, companies can purchase and produce more accurate quantities and improve inventory allocation.
Laying Off Staff
Another all-too-common nightmare scenario is when companies are forced to let valued staff members go. This can be one of the most challenging parts of running a business, as people’s lives, as well as the culture of the company, are inevitably affected significantly.
Layoffs can be for all sorts of reasons, from low sales volumes to historic overhiring, failure to adapt to changes in the marketplace, and more. However, whatever the reason, chances are it could be avoided, or the impact reduced, by using predictive analytics. Imagine if businesses were able to accurately predict how many staff would be needed to work on an upcoming project and hire accordingly. Imagine if they were able to foresee the demand for a certain product and avoid assigning too many resources to it in the first place. All this is possible with the help of predictive analytics.
How Can You Start Benefiting From Predictive Analytics
At Lynx Analytics, we provide the expertise, infrastructure, and training your business needs to get accurate insights into your marketplace and customer base.