Predictive Analytics is business intelligence technology that produces a predictive score for each customer or other organizational element. Assigning these predictive scores is the job of a predictive model which has, in turn, been trained over your data, learning from the experience of your organization.
Predictive analytics optimizes marketing campaigns and website behavior to increase customer responses, conversions and clicks, and to decrease churn. Each customer’s predictive score informs actions to be taken with that customer — business intelligence just doesn’t get more actionable than that. (Source: PredictiveAnalyticsWorld)
Predictive analytics encompasses a variety of statistical techniques from modeling, data mining and game theory that analyze current and historical facts to make predictions about future events.
In business, predictive models exploit patterns found in historical and transactional data to identify risks and opportunities. Models capture relationships among many factors to allow assessment of risk or potential associated with a particular set of conditions, guiding decision making for candidate transactions.
Predictive analytics is used in actuarial science, financial services, insurance, telecommunications, retail, travel, healthcare, pharmaceuticals and other fields.
One of the most well-known applications is credit scoring, which is used throughout financial services. Scoring models process a customer’s credit history, loan application, customer data, etc., in order to rank-order individuals by their likelihood of making future credit payments on time. A well-known example would be the FICO score.
Generally, the term predictive analytics is used to mean predictive modeling, “scoring” data with predictive models, and forecasting. However, people are increasingly using the term to describe related analytical disciplines, such as descriptive modeling and decision modeling or optimization. These disciplines also involve rigorous data analysis, and are widely used in business for segmentation and decision making, but have different purposes and the statistical techniques underlying them vary.
Predictive models analyze past performance to assess how likely a customer is to exhibit a specific behavior in the future in order to improve marketing effectiveness. This category also encompasses models that seek out subtle data patterns to answer questions about customer performance, such as fraud detection models. Predictive models often perform calculations during live transactions, for example, to evaluate the risk or opportunity of a given customer or transaction, in order to guide a decision. With advancement in computing speed, individual agent modeling systems can simulate human behavior or reaction to given stimuli or scenarios. The new term for animating data specifically linked to an individual in a simulated environment is avatar analytics.
Descriptive models quantify relationships in data in a way that is often used to classify customers or prospects into groups. Unlike predictive models that focus on predicting a single customer behavior (such as credit risk), descriptive models identify many different relationships between customers or products. Descriptive models do not rank-order customers by their likelihood of taking a particular action the way predictive models do. Descriptive models can be used, for example, to categorize customers by their product preferences and life stage. Descriptive modeling tools can be utilized to develop further models that can simulate large number of individualized agents and make predictions.
Decision models describe the relationship between all the elements of a decision — the known data (including results of predictive models), the decision and the forecast results of the decision — in order to predict the results of decisions involving many variables. These models can be used in optimization, maximizing certain outcomes while minimizing others. Decision models are generally used to develop decision logic or a set of business rules that will produce the desired action for every customer or circumstance. (Source: Wikipedia)
Joshua is working to become a Data Scientist with focus on Analytics, Big Data, Machine Learning, and Statistics. His passion for Data and Information are second to none. He is a certified IBM Cognos Expert with more than 10 years experience in Business Intelligence & Data Warehousing, Analtyics, IT Management, Software Engineering and Supply Chain Performance Management with Fortune 500 companies. He has specializations in Analytics, Mobile Reporting, Performance Management, and Business Analysis.
- 2,131 feed subscribers
- Data Enthusiast (@DataEnthusiast) on Our Leaders Deserve Better: Why We As Analysts Are Failing Them
- @DataDave on Tableau 8: A List of 35+ New Features
- @DataEnthusiast on Tableau 8: A List of 35+ New Features
- @GradientGmbH on A Map of Business Analytics Capabilities
- @freakoPLo on A Map of Business Analytics Capabilities
Tags2008 Analysis Analytics Article Big Data Book Business Intelligence Charts Cognos Dashboards Data Data Warehouse Design Dimensional Flow Elements Fusion Tables Google Humor IBM Install Learning Logical Market Microsoft Model Modeling Operational Predictive Programming Python Ralph Kimball Reporting Science Server SQL SSIS Statistics TED Tools Tutorial Unstructured Video Visualization Warehousing Windows