Predictive Analytics and Why it is Important

Predictive Analytics and Why it is Important

There is such a high emphasis and so much talk on data and analysis in today’s business culture that it is easy to become overwhelmed with all the terminology, articles, and uses of data.  So, lets break down one of the most interesting, and arguably most important terms, predictive analytics. What is it and why does it matter? 

Well, it is what it sounds like, using analytics (or data) to predict what will happen in the future.  As SAS puts it “Predictive analytics is the use of data, statistical algorithms and machine learning techniques to identify the likelihood of future outcomes based on historical data. The goal is to go beyond knowing what has happened to providing a best assessment of what will happen in the future.” Basically, companies can use data from what happened in the past to help them figure out what will happen in the future.

There are four main reasons that predictive analytics are so important to businesses.  It can detect fraud (and criminal behavior), optimize marketing campaigns, improve operations, and reduce risk. Predictive analytics help companies function better and increase profit.

So what does this process look like? There is a 7 step process to predictive analytics including some very technical abilities:

1.     Define the Project

2.     Data Collection/data mining

3.     Data analysis

4.     Statistical analysis

5.     Modeling

6.     Deployment

7.     Model Monitoring

And can they really predict the future? Well, they may not be able to predict who you will marry, but they can predict how many people will purchase a wedding dress.