For businesses that aren’t familiar with the term already, the words “predictive analytics” can seem a little frightening – but don’t let this scare you off. Predictive analytics are here to stay and may allow you to gain a competitive advantage you never previously thought possible.
What is Predictive Analytics?
The need for and utility of predictive analytics has risen out of the emergence of big data and business intelligence (BI). With modern businesses collecting so much data from so many different sources, they must find a way to organize and utilize the data in a meaningful way. Predictive analytics is one way businesses leverage all of this information and stay ahead of the competition.
Predictive analytics is a broad term with lots of different categories and applications. Companies like SA Ignite help healthcare organizations remain compliant by predicting quality scores so they can proactively address shortcomings ahead of time. Companies like Netflix use predictive analytics to select movies and make content suggestions for users based on viewing history and other metrics. Boston Medical Center uses a predictive analytics platform to properly allocate rooms and staff based on predictive patterns. The options really are endless.
As PCMag’s Rob Marvin explains, “It’s basically computers learning from past behavior about how to do certain business processes better and deliver new insights into how your organization really functions.”
4 Benefits of an Investment in Predictive Analytics
But what value can your business extract from predictive analytics? When you look at predictive analytics from this perspective, suddenly you can start to see the true value. Here’s a look at some of the specific benefits you might enjoy:
Luxury of Being Proactive
The word “predictive” is right there in the first half of the term. One of the single greatest advantages predictive analytics provides a business is the luxury of being proactive. Instead of sitting back and taking a reactionary approach to industry trends, you can actually predict what will happen ahead of time and make calculated decisions based on these beliefs. In some industries, this provides a slight advantage. In other industries, it’s enough to propel you all the way to the top.
Ability to Identify Future Patterns
Most businesses gather past data and use it to identify potential future trends. Unfortunately, this tends to create more problems than it solves.
“Most marketing assumes what happens in the past will happen the same way in the future,” analyst Daniel Newman explains. “But as we’ve seen throughout the digital transformation, the future is all about change. Predictive analytics help you get a handle on these concepts in ways that can shed light on future performance — which is where the growth lies.”
Better Customer Retention
In most cases businesses that use predictive analytics notice improvements in customer retention. This is the result of being able to track and analyze past customer behavior to predict what a customer wants or needs in the future. It can also help shed light on customers who are at risk for leaving.
Finally, you can’t forget about demand forecasting. For businesses that sell physical products, being able to more accurately order inventory makes a huge difference in the company’s ability to make cost-effective investments.
Putting it All Together
At the end of the day, predictive analytics is a game-changer. The key is to find one or two specific applications for your business and to focus on those (rather than being overwhelmed by all of the different uses). What you’ll find is that predictive analytics offers tremendous value and may allow you to discover a competitive advantage you didn’t previously possess.