One of the most common questions that get asked about predictive analytics is, “Where do we begin?”. Before anything else – software, techniques, and even training – your business needs to decide on what kind of problem to solve first. What problem will provide the best ROI when predictive analytics is applied to it?
A solid area to focus on is in your organization’s daily operations. This kind of single transaction/interaction with a customer is also called an ‘operational decision’. Wondering what the best offer you could make to a customer in order to keep them or judging whether a claim is fraudulent falls under this type of decision. This is a practical area to begin with because single transactions make it easier to create effective predictive analytic models.
Ever single order, application or claim requires that a decision be made. Because of their simple and straightforward nature, there are fewer challenges to building predictive models based on these transactions. The high volume of transactions means there is a wealth of data available for analysts to work with. More often than not, there will be a significant amount of data for each customer, with every additional transaction contributing more data. Businesses that hope to gain insights on customer behavior over time will then greatly benefit from relying on predictive analytics.
With these transactions, only a set number of actions can be observed, making it easier to link outcomes or results to specific choices. This will then build a defined feedback loop that helps your business improve predictions as time passes.
The sheer volume of orders or transactions finally allows a lot of room for testing and experimentation. For example, it makes it easier to try variations of approaches to cross-selling with different orders to see which approaches are most effective. The resulting data collected also greatly improves the quality of succeeding predictions. Begin your journey to predictive analytics success by working on improving your day-to-day transactions!