What is Predictive Analytics?
Predictive analytics is an aspect of data mining that is related to the overall prediction of future probabilities and trends. To make future predictions, it employs AI, machine learning, and historical data. A business intelligence technology tool provides a predictive score that informs actions that customers should take. Historical data is supplied into a mathematical algorithm, which searches the data for trends and patterns and builds a model for it. The model is then applied to current data to predict what will happen next.
Predictive analytics fundamentally provides an answer to the query, "What is most likely to occur based on my current data, and what can I do to alter that outcome?" Many different sectors are being transformed by predictive analytics. It can prevent fraud from occurring, make a modest business into a titan, and even save lives. Predictive analytics can be helpful in an infinite number of circumstances.
Benefits of Predictive Analytics
There are various benefits to using predictive analytics but the main one is the ability to make predictions in difficult situations where no direct, clear data is available. The forecast can be based on data from a variety of sources, and even information that doesn't seem to have much to do with your problem might be useful.
Predictive analytics can be used by business executives, academics, scientists, and investors to lower the risk of a variety of operations. Each time the risk is identified and mitigated the control over capital and earnings is protected. Even small occurrences may impact the business and bring unforeseen threats, that can bring catastrophic results in the long run.
Predictive Analytics Used in the Industry
Machine downtime can cost manufacturers millions of dollars a year in lost profits, maintenance expenses, and lost production time for employees. Manufacturing managers can monitor the status and performance of equipment and predict breakdowns by embedding predictive analytics in their applications.
Data may include maintenance data logs that the technicians preserve, particularly for older machines. For newer machines, data coming in from the different sensors of the machine—including temperature, running time, power level durations, and error messages—is very useful.
Determining the likelihood of breakdowns is a common way manufacturing can use predictive analytics. Then, manufacturers can prepare ahead of time to turn off machines for preventive maintenance. Predictive analytics can also restrict or eliminate any impact on the production pipeline.
Any finance professional knows how much of a disruption missed payments can be. Financial groups with outstanding invoices need to know who will—and who will not—pay their bills on time. The predictive analytics tool can examine the demographics of an organization or an individual, the products they have used or purchased, their past payment history, customer support logs, and any recent adverse incidents.
By predicting which individuals or firms are likely to miss their next payment, financial groups can better manage cash flow and take steps to mitigate the problem, such as sending reminders to potential late payers.
Today, data growth has an impact on every industry. Machine learning and predictive analytics are becoming more and more popular as the amount of healthcare data skyrockets. By incorporating predictive analytics in their applications, healthcare practitioners can improve patient outcomes, enhance health operations, and detect fraud.
In a healthcare setting, the data analyzed may include patient demographics, patient vitals, past medication history, visits to the hospital, lab test results, and claims.
A common example of predictive analytics in healthcare involves predicting which patients are at high risk for a specific condition (such as diabetes). Practitioners can then prioritize high-risk patients for screenings first. In addition to aiding patients, this enables professionals to use their time and resources more effectively.
Insurance fraud can be committed through a variety of inventive methods, such as staged incidents, information withholding or falsification, and fraudulent transactions. Predictive analytics technology allows insurance companies to track and monitor suspected fraudsters without having to spend time evaluating each claim.
The predictive analytics algorithm can consider the location where the claim originated, time of day, claimant history, claim amount, and even public data.
By applying the model to new claims, insurance companies can quickly detect suspicious activity. Any allegation that seems out of the ordinary is labeled as such. Fraudulent claims will be put on hold and sent back to the investigators for additional review. To lessen the possibility of receiving false leads along with genuine ones, potential alerts might also be cross-referenced with data from public registers.
Customer churn has always been a challenging metric for SaaS companies to comprehend. Most churn applications only tell you how many customers churned last month and how much money was lost. However, predictive analytics allows product managers to foresee and reduce turnover with far greater accuracy than traditional analytics tools, which can generate substantial revenue.
The predictive analytics algorithm should consider customer demographics, products purchased, product usage, customer calls, time since the last contact, past transaction history, industry, company size, and revenue.
The customer success team may be notified to contact the customer to see what can be done to assist them, or they may send an automated email to the customer outlining how they can obtain more value from the application. It is critical to determine not just who will churn, but also who will not churn. Knowing which clients are likely to remain loyal allows you to develop creative marketing campaigns or strategic partnerships to keep them engaged.
The Future is Even Brighter
Regardless of the industry predictive analytics can be used to produce deeper insight into any complicated process as long as the related data is available. Predictive analytics enables leaders to make sound decisions that can not only increase sales figures, change marking strategies, prevent costly malfunctions or assess staffing needs but save lives, prevent disasters and help to avoid occurrences of unnecessary tragic events as well.
More sectors are seeing the benefits of predictive analytics and are adapting it to their businesses—a Deloitte survey found that 97% of companies are planning on integrating AI into their business activities over the next two years.