Type of Analytics: Part 1 - Descriptive and Predictive Analytics
What is analytics? – In simple terms it is information resulting from the systematic analysis of data or statistics.
Analytics can be broadly classified into four different categories depending on what questions does the outcome of the analytics answers. Descriptive analytics-to check what has happened based on the available historical data, Diagnostics analytics-to look out for reason for the past event, Predictive analytics -to forecast what are the potential things which might occur in the future depending on the events and Prescriptive analytics-it suggest the type of action which should be taken today to be better prepared for upcoming event. This piece we will briefly discuss about the Descriptive and Predictive analytics.
Descriptive analytics is about describing all the historical data in an easy to understand form. As per the name, it summarizes the given set of data. This helps the management to draw conclusion from a huge dataset. It can be used to understand at consolidated level the current status of the company (visualizing entire operational status at one go) and to summarize it in a crisp form. It can also act as a foundation stone for further data analytics like Predictive and Prescriptive analytics. To explain using small example, Descriptive analytics would provide insights to understand the sale of particular product in a particular geographical region in a particular time window. Descriptive analytics brings together data in different forms on a single platform and helps in examining the business performance in the past and on the real time basis. It also helps to plot the trends in the data which were not seen in the raw dataset. It acts as good teacher to understand the historical movement in a particular parameter (within and outside) the company and thus helps to take appropriate decision in the future.
?Predictive analytics is about identifying pattern in the historical data and to predict future. The need for predictive analytics is felt when the businesses starts looking out for answer for the questions like who will respond to our marketing campaign, what should be our positioning in the market to maximize sales, what can be potential ticket size of the customers in a particular geographical location for the given product, etc. Properly modeled predictive tool can indeed help corporations to adopt focused marketing strategies, appropriate market segmentation to reach customers in a better way, to build products which suit customers’ need, design advertisement which will appeal to customers, to measure debtor risk, effective pricing of products to enhance sales, improving success probability by discarding potentially non-useful medical trails etc. These studies find wide application across sectors / industries. In addition, companies can improve operating performance by using predictive analytics. It can be applied in supply chain management, human resources retention (to predict attrition rate), market research outcome analysis, customer retention forecast and strategy to reduce churn etc. It lays down the path to decide future course of action.
Companies of all sizes can use Descriptive and Predictive analytics across different business operations. The application will assist companies to drive strategic decision making process. Being aware of the moving parameters in the entire business operation, and forecasting them with the reasonable level of certainty will surely assist companies to streamline their operations, enhance their revenue, reduce operating expense and thus improve profits and portability.
What does Diagnostics analytics and Prescriptive analytics mean. Type of Analytics: Part 2