Predictive analytics helps you predict customer behavior

ign="center">spends to the right audience.
In the famous Hollywood movie Minority Report, lawâ—  Cost Optimization - Typically, supply
enforcement has prevented all murders in Washington.chain costs constitute a significant portion of the cost
Using the premonitions of Pre-Cogs - three psychicbase of product marketing. Optimizing supply chain
humans led by Chief John Anderton (Tom Cruise) arebecomes a key challenge. Let’s take the
able to foresee crimes and arrest the perpetratorexample of the media and entertainment industry.
before harm is done.Every new DVD release’s distribution to
As customers become more discerning and theoutlets is not governed by a demand forecast. As a
competitive pressures increase like never before,result there are cases of both stock-outs and
wouldn’t it be cool if we as businessover-stocking. DVDs reshipped resulted in increased
managers could foresee what each of theirdistribution costs. And re-shipping DVDs result in lost
customers will do next, thereby affecting thesales if they arrive late. Step in predictive analytics
outcome?– which helps develop a forecasting model to
Think about it. A typical conversation in a telecomestimate store demand based on consumer
company would be “Hi Tom, I can tell you thatdemographics, store traits and historical sales. Errors in
Mr Jones and Mr Parker are likely to switch to aallocation of DVDs can be reduced by over 40%!
competitor next week. What do you think we shouldâ—  Risk management – This is one
do to retain them?” That insight is powerful!of the most critical areas where predictive analytics is
Well, predictive analytics lets you do just that.being utilized in today’s economic scenario.
Predictive analytics encompasses a variety ofLet’s take the example of a retail bank where
techniques from statistics and data mining that analyzepredictive analytics allows organizations to assess
current and historical data to make predictions aboutboth risks and opportunities: which customers are likely
future events. It is being applied virtually across allto default on loans; which are likely to be profitable,
functions of an organization including Sales &long-term customers? Predictive analytics helps you
Marketing, Human Resources, R&D, Manufacturing,identify customers that are most likely to default and
Operations, Logistics, Risk Management, Finance &armed with this insight on expected consumer
Accounting; you name it. The three major benefitsbehavior, the bank can make decisions about
being derived include revenue generation, costmarketing new products to this customer segment.
optimization and risk management. Let me share aI have seen Predictive Analytics work extremely well
few examples:with clients with clear tangible results. Chief John
â—  Revenue Generation - Let’sAnderton had to wait till 2054 to see into the future,
say you are launching a new product variant. Whilewith predictive analytics you can do so now –
you have a good idea (based on gut, some marketwell almost!
research and basic statistical modeling), you can neverI encourage many of you to visit the Predictive
really say which customer segment is likely to buy.Analytics World which is taking place from February
Predictive analytics empowers you to pinpoint exactly18-19, 2009 at San Francisco. The conference will
which segments of customers are most likely to buyfocus on concrete examples of deployed predictive
this new offering. It will also give you the insight onanalytics. Hear from the gurus on precisely how
which customers are not likely to buy and which willFortune 500 analytics competitors and other top
buy only if there is a promotional offer coming alongpractitioners deploy predictive modeling, and what kind
– with tremendous granularity. This will ensureof business impact it delivers.
that you channel your marketing and communication