You've got data. How do you start turning it into value? One answer is predictive analytics.
Predictive analytics applications parse complex data sets that integrate data from multiple sources to generate insights. You can use the predictions to make informed decisions about running or growing your business.
The category of analytics application you choose will depend on your needs and the use case, and you may end up using more than one at a time. Three categories of analytics that companies deploy today include descriptive, predictive, and prescriptive.
You might use descriptive analytics to understand key trends in past business operations, and deploy predictive analytics to assess current trends and compare them to historical trends. You might leverage prescriptive analytics to help devise or evaluate changes you intend to make to improve the business going forward.
Try Stitch for free for 14 days
The exact processes behind predictive analytics models vary. However, all predictive analytics operations follow these basic steps:
Is real-time data replication necessary for predictive analytics? Real-time replication can degrade the performance of data warehouses, bogging down data loading and taking up processing resources that could be spent creating reports.
For most organizations and for most use cases, data that is a few minutes old is sufficiently up to date. If your company uses data analytics to give managers the information they need to make better decisions, it doesn't make sense to replicate data for your analytics tools faster than the human brain can process.
You can create or deploy multiple types of models as you create predictive analytics, each of which caters to different use cases and needs. The data that you feed to the models may also be different, depending upon your goals. Here are three common types of predictive analytics models.
A classification model, as you might expect, places items into categories.
For example, you might use a classification model to analyze social media posts that mention your company and classify each as positive or negative. You could do this using a sentiment analysis algorithm that parses the text in each message and — based on characteristics like the words and emoticons present — determines whether the poster was expressing an opinion that is primarily positive or negative (or neutral). Based on these classifications, you could decide which negative posts require a response in order to resolve a complaint, and which positive ones your marketing team could use to promote the company.
A regression model predicts how an ongoing trend will change in the future.
For instance, a regression model could help you predict how much traffic you can expect for your online store for a particular time of day, day of the week, or season. By analyzing data about current website traffic, as well as data from periods in the past, a regression model can predict whether, for example, you can expect more or less traffic to the site for the next holiday season. This insight can help your IT team to determine how many resources to allocate to the site to meet demand. It could also help your marketing and sales teams assess the role that the site should play in their holiday campaigns.
An outlier model highlights anomalous figures — outliers — in a dataset.
For example, an outlier model might highlight a dramatic increase in customer support calls or product returns in a short period of time, indicating a product failure that leads to a recall. An outlier model also may be used to predict fraud by highlighting outliers in insurance claims, medical records or financial transactions.
To understand how predictive analytics creates value in the real world, consider some common examples of predictive analytics in action:
Many industries already use predictive analytics to help improve business outcomes.
Predictive analytics offers opportunities for improving health care outcomes. Not only can it help reduce fraud and costs, it can also help with tasks such as reviewing medical imaging (by using classification models to determine whether an image suggests the presence of a problem) or assessing the risk factor of a patient becoming addicted to certain types of painkillers.
Marketers need to know what customers want, when they want it. With predictive analytics, marketing teams can assess how well online ads are performing, for example, and adjust the ads accordingly to maximize their impact. Or they can use data to help optimize the customer experience and drive more sales.
From fraud detection to inventory management, predictive analytics helps retailers optimize and standardize their operations. With predictive analytics, companies can prevent fraudulent transactions, or order more of a particular item before it's sold out.
Predictive analytics starts with determining which data you need to support the model or models to use for your business, then building a data pipeline to bring that data into a single repository against which you can run your analytics.
The Stitch solution is simple, straightforward, and ready to go right out of the box. You can assemble a data pipeline in the cloud and get connected to your favorite analytics tools in minutes. So, set up a free trial today, and make more of your data available for analysis more quickly.