Predictive Analytics – what is it and how to use it in your business?

Do you know how powerful your company's data is? You've probably heard about data automation and machine learning, but that's not all you can achieve with the proper use of the information you already have. If you want to provide your organisation with the best business results – this article is for you. Find out what predictive analytics is and how to use it to get the desired results.

What is predictive analytics?

In a nutshell, predictive analytics uses historical data and analytical techniques to predict what will happen in the future. It is a field of data analytics that uses machine learning, data mining techniques and statistical modelling.

The primary purpose of using this method in business is to predict future trends and behaviours in the market to make more informed and data-driven business decisions.

Predictive analytics – how it works

Notice that the process of predictive analytics depends on the business goal you want to achieve. It usually consists of the following steps:

1. Defining the purpose of the analysis and the assumptions that our model will verify
2. Exporting and collecting data in one place
3. Preparing data for further analysis by, for example, eliminating erroneous values 
4. Creating a predictive model based on aggregated data
5. Integrating the model with an appropriate system for forecasting specific results

Why should you use predictive analytics software?

According to The 2020 Global State of Enterprise Analytics report, as many as 59% of organisations use predictive analytics tools, and this number is growing rapidly every year. What aspects make it so popular? Below you will find the essential benefits of this method.

1. Increase the effectiveness of marketing campaigns

Using predictive analytics, you can identify your customers' behaviours and buying habits. This way, you will know if your marketing strategies are efficient.

In addition, it will allow you to create more informed and effective marketing campaigns to improve your communication and successfully reach the target group. 

2. Build competitive advantage

Nowadays, customer buying patterns and market trends are changing rapidly. If you want to gain a competitive advantage, you should use tools to identify these trends and stay ahead of your competitors.

Predictive analytics will help you generate more valuable leads and analyse relevant customer information so you can retain them. 

3. Gain valuable customer information

Predictive analytics allows you to get a deeper understanding of your customer. As a result, you are able to predict their preferences, buying behaviour and reactions.

Based on this information, you can take appropriate actions to attract new customers and maintain brand loyalty among your clientele.

4. Make better decisions by analysing past mistakes

With predictive analytics, you can learn from your past mistakes and analyse them to avoid similar cases in the future. Thus, you can avoid many failures and create business plans that will guarantee better results.

5. Improve production efficiency

Predictive analytics can do far more than improve marketing efforts. For example, in the manufacturing industry, it allows forecasting the demand for certain products and managing resources properly to make your company as efficient as possible.

As a result, it helps in increasing revenue and reduces the risk of potential poor business investments.

6. Fraud detection and prevention

Predictive analytics can identify patterns to detect unwanted activities such as cybercrimes. As a result, organisations are able to implement procedures to secure data and protect the company from cybercriminals.

Which industries should use predictive analytics solutions?

Predictive analytics will benefit any company regardless of its size, type and specialisation. Below we will list the industries for which this tool is just indispensable today.

Predictive analytics in marketing

With predictive analytics software, you can increase the effectiveness of almost any marketing activity. These tools will allow you to take maximum advantage of customer data to gain new customers and retain current ones. 

Such tools allow for lead scoring, which is the classification of leads based on their sales funnel. In this way, marketing and sales departments can determine what actions to take based on predictions about the future buying habits of specific individuals. 

What's more, with predictive analytics, you're able to see what type of content works better for certain groups of people, as well as what channel is the best one to reach them. When leads receive higher quality communication from your organisation, it increases the probability of sales conversions.

And what about customer satisfaction? By having historical data on purchases, behaviours and customers, companies can better understand customers' needs and expectations. Such information can help create new products or improve existing ones.

Predictive analytics in the financial services

Financial institutions such as banks use predictive analytics to detect and prevent financial fraud. Such tools record and analyse communication between the bank and the customer 24/7, and detect any illegal activity every time, in all time zones. 

Moreover, banks also use predictive analytics to predict credit risk. Advanced predictive tools help them create a complete customer profile, taking into account more details than it was ever possible and analysing all possible risks.

Predictive analytics in the insurance industry

Predictive analytics software allow you to analyse huge sets of data and parameters to create comprehensive reports that help you evaluate risk, create appropriate strategies and deliver more personalised solutions to your customers.

While in the past, insurers were able to consider only a few variables to change premiums when pricing a policy; today, predictive analytics allow them to analyse much more data, making their offerings more precise.

What's more, predictive analytics can also be used in claims management. For example, when a claim is filed, predictive tools can signal potential concerns and inquiries and even assess the claims' validity, making them process much easier.

Predictive analytics in healthcare

Predictive analytics can have a tangible impact on the profitability of your business and human lives. The use of predictive analytics software in the medical industry is just one example. These solutions help measure, aggregate and analyse even the most complex data on patients to provide appropriate healthcare.

Moreover, thanks to predictive models for hospital length of stay and readmission rates, medical facilities can significantly reduce operating costs. 

Another attractive solution in this sector is electronic health record (EHR) systems, which use predictive analytics to identify patients who are likely to miss an appointment. When this happens, the system can send the patient an appropriate reminder about the upcoming meeting with a doctor.

Summary

The benefits and use cases of predictive analytics presented in this article are just a drop in the ocean of possibilities of this innovative technology. Your organisation's data can provide many valuable insights about the future and direction of your entire business. 

If you want to learn more about how predictive analytics can help your company, contact our specialists. We will be happy to help and advise you on choosing the optimum solution to achieve the best business results.