The benefits of predictive modelling for companies
The buzzwords ‘big data’ and ‘data science’ have had a significant impact on the business world. Companies are able to capture more data than ever before, and due to the rise of smartphones and the ‘Internet of Things’, this data has become increasingly detailed and specific. Big data has enabled companies to gain insight into consumer trends and behavior, and many companies have begun to develop techniques to leverage the influx of data.
This has prompted a variety of developments in the workforce and the skills that are needed. The ‘data scientist’ – who helps businesses explore and interpret their data – has emerged as a high-demand and popular role in the past few years (Harvard Business review1 named it the “sexiest job of the 21st century”). Data scientists work alongside ‘data consultants’, who help to develop data strategies that put this information to good use.
Arguably, the most lucrative development for businesses has been the rise of ‘predictive modelling’, or the use of statistics and machine learning to create models that predict the future. Used in conjunction with data mining and big data technologies, these techniques enable companies to hone their predictive analytics, analyzing existing customer data to create accurate forecasts of future trends and patterns.
What is predictive modelling?
Put simply, predictive modelling involves the use of historic and current data to work out the likelihood of future outcomes. Depending on the industry you’re in, you could use ‘predictors’ such as age, gender and purchasing history (or something more specific, like credit history) to create a data set about a customer or demographic group. This data is then turned into a statistical model, from which predictions can be generated. The model is updated as and when new data becomes available, in order to validate and refine it.
Helping companies look forward
One of the main benefits of predictive modelling is that it enables you to respond more intelligently to the rapid changes and evolutions of the market. Rather than being reactive, it allows you to be proactive. This means that you can be fully prepared for future events and embrace change more effectively, improving your chances of anticipating your customers’ needs and creating an excellent and profitable customer experience.
If you’re in financial services, predictive modelling can help you with profitability analysis, fraud detection and management, regulatory compliance and risk assessment – for example, in working out whether or not to grant someone a loan or mortgage. It can also be invaluable in revealing market segments that have not yet been tapped into. According to the Aberdeen Group2, financial services companies saw a 10% increase in finding new opportunities within their customer base when using predictive modelling (compared to a 7% increase in companies not using the technique).
Data modelling can also be used to predict seasonal patterns or future demand for products, which can be invaluable to the pharmaceutical or retail industries, for example. By doing so, you can ensure that the products being developed are tailored to this data, and that stock levels are managed as efficiently as possible (reducing waste and maximizing cost-effectiveness). At the same time, you can use the information to anticipate customer needs.
Reducing costs and boosting profits
Being able to predict future trends will have a direct impact on your ability to reduce costs and generate profits. You’ll be able to decide and manage your budget more accurately, and therefore plan your resources efficiently. At the same time, you can reduce the costs involved with data analysis projects, as data scientists and consultants can be brought in on an on-demand basis.
Easy-to-understand predictive analytics
The beauty of hiring an on-demand data team is that they can turn your complicated pool of big data into straightforward and actionable insights that you can implement to improve your business performance. Data consultants will make your predictive model intuitive and relevant to your business, so that you can take a more informed approach going forward.
Here at certace, we can curate your pool of data experts so that you have access to the exact skills you need for your analysis project. Have a look at the success stories to find out more about big data consulting and what the benefits are for your business.