Though predictive analytics and data mining are particularly hot topics at the moment, they’ve been widely used in marketing analytics and research for well over 30 years. Marketing mix models using econometric algorithms were developed in the ’80s and ’90s, while other statistical approaches, such as cluster analysis for segmentation analysis, were already in use at that time.
Digital analytics has gotten more predictive recently, with a greater emphasis on what might happen in the future, as opposed to just describing what happened in the past. Companies have made significant investments in getting their digital data into environments where it’s possible to leverage predictive analytics. Data scientists are also being naturally exposed to more and more digital data as their business becomes more and more digital. Additionally, some digital analytical technologies are building predictive capabilities into their platforms.
The industry is moving toward prescriptive analytics, a mash-up of predictive and optimization, that focuses on “What should I do?” rather than “What did/may happen?”
As a result, we can see predictive analytical techniques being used and deployed more widely to address such issues as understanding marketing ROI, scoring customers for the next best offer, and understanding which customers are at risk of churn. Data mining and machine-learning techniques are being used to create more powerful audience and customer segments. So where is all this going?
Predictive analytics is evolving into prescriptive analytics, a mash up between the worlds of predictive analytics, and simulation and optimization, which have traditionally been used to understand the best course of action given a series of constraints. Though these techniques, such as linear programming and Monte Carlo simulation, have their applications in marketing analytics, they’re deployed far more extensively in areas, including supply chain and logistics. So whereas descriptive analytics address what happened and predictive analytics address what might happen, prescriptive analytics answers the question, “What should I do?”
In the marketing world, descriptive analytics would tell me that a customer has churned. Predictive analytics will tell me that a customer is likely to churn. Prescriptive analytics will tell me that a customer is likely to churn and what the appropriate intervention strategy should be, based upon my objectives and constraints at that time.
In terms of the data – which will be predominantly real time, consist of multiple and integrated data sources, and be both structured and unstructured – the analytics will be integrated into the technologies. The algorithms will also need to be adaptive, meaning that there needs to be a feedback mechanism in place. Finally, workflow and governance must exist around the data and technology to ensure that objectives and constraints are in place.
Few companies are at the stage where they’re deploying prescriptive analytics across the enterprise and for the foreseeable future, this will define those who are able to be analytical competitors.Read more…